Interfirm Comparison

Abstract

There is much to be learned about the past progress, the present financial position and the future prospects of a business from the study of a set of final accounts, but there are pitfalls for the inexperienced and overconfident, and even to skilled accountants a scrutiny of figures and management ratios, in isolation from those of other firms, can yield only a limited amount of information. This case study, written in co-operation with the Centre for Interfirm Comparison Ltd, illustrates the importance of placing the measures of a firm’s operating and trading results in perspective, so that its relative place is clear in the league table of success represented by the management ratios of competing firms. Comparisons with these ratios enable management to see where their business is weaker or stronger than their competitors’ and indicates areas where action may be taken to improve results.