Comparitive and Ratio Analysis

Comparative and Ratio Analysis Team Reflection

ACC/561

University of Phoenix

Team Reflection: Comparative and Ratio Analysis

Comparative and Ratio Analysis are among several different tools used in analyzing

financial statements. Both are used by investors and other users of financial statements to see

different aspects of a company, financially. The following will differentiate between the two and

state each tools purpose as well as its importance.

Differences

Comparative and ratio analysis are different in many ways. Comparative analysis is used

to calculate the different between multiple years of data and reports that is difference in

percentages. Most accountants use comparative analysis for business owners to take the

information for reviewing purposes. Accountants can evaluate the performance of managers,

new business and new products on one financial statement.

With ratio analysis, is based on line items of the financial statements. Companies use

ratio analysis to evaluate aspects of their operating and financial performance. This help to know

if the financial is efficiency, liquidity, profitability and solvency. Most people use the ratio

analysis to show potential improvement or deterioration in a company’s financial situation.

Many companies may also use ratio analysis to compare to companies in the same sector. Both

ratio and comparative analysis are different yet they are both very important to analysts in

making decisions for companies.

Purpose

The purpose of comparative analysis is to compare data within financial statements. Financial statements contain data such as time periods, assets, liabilities, net sales, and so on and a comparative analysis will compare these data. Companies have many financial goals that they have to reach or financial decisions that they have to make and may use a comparative analysis as a purpose to help influence their decision.

The purpose of a ratio analysis is to determine the...