comparability

(noun)

Comparison or equivalence.

Related Terms

Examples of comparability in the following topics:

  • Comparability

    • If a company uses LIFO, the recorded amount of inventory is not an accurate reflection of cost, reducing comparability to companies using FIFO.
    • This low valuation affects the computation and evaluation of current assets and any financial ratios that include inventory, resulting in reduced comparability between companies using LIFO and others using FIFO.

  • Objectives of Accounting

    • International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.
    • They are progressively replacing the many different national accounting standards.The rules to be followed by accountants to maintain books of accounts which is comparable, understandable, reliable and relevant as per the users internal or external.

  • Debt-to-Equity Ratio

    • The Debt-to-Equity Ratio is a financial ratio that compares the debt of a company to its equity and is closely related to leveraging.

  • Reporting Irregular Items

    • An example, if a company switched from using a weighted-average method to using a LIFO method of valuating inventories, both values for the same time period should be calculated and compared.
    • All comparative financial statements should be restated.

  • Introduction to IFRS

    • The IFRS is a common global financial language for business affairs that is understandable and comparable across international boundaries.
    • In some countries, local accounting principles are applied for regular companies, but listed or larger companies must conform to the IFRS, so statutory reporting is comparable internationally, across jurisdictions .
    • The IFRS is designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.

  • Adjusting for LIFO Reserve

    • A company can always convert from LIFO to FIFO, which is important if you are trying to compare companies when they use different accounting methods.

  • Current Ratio

    • It compares a firm's current assets to its current liabilities.
    • Financial analysts use financial ratios to compare the strengths and weaknesses in various companies.

  • Additional Factors to Consider

    • For example: the company's relative size compared with other businesses in its industry, relative product or service quality, product or service differentiation from others in the industry, market strengths, market size and share, competitiveness within its industry in terms of price and reputation, and copyright or patent protection.
    • The company's relative size compared with other businesses in its industry, relative product or service quality, product or service differentiation from others in the industry, market strengths, market size and share, competitiveness within its industry in terms of price and reputation, and copyright or patent protection of its products are all important in this examination.
    • In addition, the valuator must analyze the values of comparable companies to determine their relationship to the company's value.

  • Conducting a Physical Inventory

    • When analyzing the results, a company must compare the inventory counts submitted by each team with the inventory count from the computer system.

  • Times Interest Earned Ratio

    • Comparing the respective Times Interest Earned Ratios would lead an analyst to believe that Company A is in a much better financial position because its EBIT covers its required interest payments 5 times, relative to Company X, whose EBIT only covers its required interest payments 1.67 times.