Running head: COMPARATIVE AND RATIO ANALYSIS COMPARISON

Comparative and Ratio Analysis Comparison

Sarah Chau, Gabriella Goodfield, Janet Jackson, and Mohammed Al Mufti
ACC/561
October 19, 2015
Myrtle Clark

COMPARATIVE AND RATIO ANALYSIS COMPARISON

Comparative and Ratio Analysis Comparison

Introduction
Companies have to know how they are doing in order to work. The comparative and ratio
analysis are done. The results would indicate how well or how bad the companies are doing. The
analyses are done with the company and are done to compare with other companies. Ratios are
use as well to see the health of a company.
Comparative and Ratio Analysis Comparison
Comparative and ratio analysis provide information to conduct financial reviews and
profitability analysis. These reports use the same financial statements and usually occur at
monthly, quarterly, and yearly. Comparative analysis usually determines the difference in dollars
between each item on the account while recording the change of percentage between each item.
This analysis provides a fast review of growth in different business areas. On the other
hand, ratio analysis takes more time to compute and analyze. Analysts can use comparative and
ratio analysis simultaneously. For example, a company can compare the different ratio's during a
given period and compare, it to previous years' recorded data.
There are three comparative analyses. They are the following:
1. Horizontal analysis which looks at a companys data over a specific frame of time to see
if there was an increase or decrease
2. Vertical analysis which looks at a companys given financial statement as a percentage of
a base
3. Ratio analysis can involve various ratios of a companys financial statements. Some of
the ratios that are looked at are the following
a. A liquidity ration looks at a companys ability to meet its short term obligations
and any cash needs

COMPARATIVE AND RATIO ANALYSIS COMPARISON

b. A solvency ratio looks at the companys ability to meet its long term debt
obligations
c. The profitability ratio is the companys measure of its operating success over a
given time frame.
Ratio analyses are powerful tools for creditors to determine whether a company is
successful enough for the creditor to extend a line of credit. In addition, other external users may
use these ratios to decide whether to invest in a company.
Comparative Analysis compares item per item and compares similar items. In accounting,
usual two years are compared. This is achieved by doing a Balance Sheet In accounting, for
example changes in a financial items over several accounting periods may be presented together
to detect the emerging trends in the company's operation and results"(businessdictionary.com,
n.d). In addition to the horizontal analysis and vertical analysis, we have the intracompany basis,
intercompany basis and then industry average. The company can do the intracompany basis
meaning that this done within the company. Then the intercompany basis would be comparing
with other companies. Industry Average is done to see the company position in the industry.
The analysis of financial statement data used various devices to collect the information that
is required in the financial statement. These devices are ratio analysis, comparative analysis,
percentage analysis and examination analysis. All of them are important in the analysis of
financial statement and no one is more important that the other but today we will do a simple
comparison between comparative and ratio analysis.

COMPARATIVE AND RATIO ANALYSIS COMPARISON

Comparative analysis is one of the devices or tools that analytical use it in the financial
statements and it is very helpful when a company wants a very deep information on its financial
information for different period to do some performance on its financial statements. While ratio
analysis is the start point that a company starts with when they want to develop the information
in the financial statement that it collects them from analyst. Example on comparative analysis, it
is very helpful for us when trying to figure out which car we want to buy. It lets you see the pros
and cons side by side in a visually pleasing format.
Conclusion
The comparative and ratios analysis are important to the company and external users.
External users can be employees, unions, investor, and public. The analysis would be done for
different periods and/or two periods together

COMPARATIVE AND RATIO ANALYSIS COMPARISON

References
Comparative Analysis definition
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