comparative

Examples of comparative in the following topics:

• Industry Comparisons

  • While ratio analysis can be quite helpful in comparing companies within an industry, cross-industry comparisons should be done with caution.
  • However, while ratios can be quite helpful in comparing companies within an industry and even across some similar industries, comparing ratios of companies across different industries may not be helpful and should be done with caution .
  • However, in terms of ratio analysis and comparing companies, it is most helpful to consider whether the companies being compared are comparable in the financial metrics being evaluated in the ratios.
  • Valuation using multiples involves estimating the value of an asset by comparing it to the values assessed by the market for similar or comparable assets in the peer group.
  • Describe how valuation methodologies are used to compare different companies in different sectors

• Benchmarking

  • Comparing the financial ratios of a company to those of the top performer in its class is a type of benchmarking.
  • Financial ratios allow for comparisons and, therefore, are intertwined with the process of benchmarking, comparing one's business to that of others or of the same company at a different point in time.
  • In many cases, benchmarking involves comparisons of one company to the best companies in a comparable peer group or the average in that peer group or industry.
  • The most useful comparisons can be made when metrics definitions are common and consistent between compared units and over time.
  • From a management perspective, benchmarking using ratio analysis may be a way for a manager to compare their company to peers using externally recognizable, quantitative data.

• Trend Analysis

  • Trend analysis consists of using ratios to compare company performance on an indicator over time, often to forecast or inform future events.
  • In addition to using financial ratio analysis to compare one company with others in its peer group, ratio analysis is often used to compare the company's performance on certain measures over time.
  • This often involves comparing the same metric historically, either by examining it in tables or charts.

• Advantages of the IRR Method

  • The IRR method is easily understood, it recognizes the time value of money, and compared to the NPV method is an indicator of efficiency.
  • The internal rate of return (IRR) or economic rate of return (ERR) is a rate of return used in capital budgeting to measure and compare the profitability of investment.
  • Compared to payback period method, IRR takes into account the time value of money.

• Comparing Interest Rates

  • Variables, such as compounding, inflation, and the cost of capital must be considered before comparing interest rates.
  • However, it is not enough to simply compare the nominal values of two interest rates to see which is higher.

• Comparing the Fields of Finance, Economics, and Accounting

  • Statements are created under a standardized set of accounting laws, which allows one to easily compare and contrast companies.

• Defining the IRR

  • IRR is a rate of return used in capital budgeting to measure and compare the profitability of investments; the higher IRR, the more desirable the project.
  • The internal rate of return (IRR) or economic rate of return (ERR) is a rate of return used in capital budgeting to measure and compare the profitability of investments.

• Advantages of the NPV method

  • As long as the NPV of all options are taken at the same point in time, the investor can compare the magnitude of each option.

• Market/Book Ratio

  • The price-to-book ratio is a financial ratio used to compare a company's current market price to its book value.
  • The price-to-book ratio, or P/B ratio, is a financial ratio used to compare a company's current market price to its book value.
  • P/B ratios are commonly used to compare banks, because most assets and liabilities of banks are constantly valued at market values.

• Selected Financial Ratios and Analyses

  • When using comparative financial statements, the calculation of dollar or percentage changes in the statement items or totals over time is horizontal analysis.
  • Financial ratios, which compare one value in relation to another value over a 12 month period, are computed using information from a company's financial statements.
  • A company's financial ratios can also be compared to those of their competitors to determine how the company is performing in relation to the rest of the industry.
  • When comparing two companies, in theory, the entity with the higher current ratio is more liquid than the other.