Question

State the principle which enables the comparison of the financial result inter- firm as well as intra firm.

Answer 1

Answer:

Intra-firm comparison means comparison of two or more departments or divisions of the same business unit with the objective of meaningful analysis in order to improve the operational efficiency of all the departments or divisions. Both, the inter firm comparison and intra-firm comparison have the same objectives.

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Answer 2

The principle enabling the comparison of the financial result inter- firm as well as intra firm are the comparative financial statements.

• The comparison of both intra-company and inter-company financial statements over a specified time period is facilitated by the comparative statements
• The statements exhibit the absolute statistics, the percentage and the absolute shift in the financial elements.
• Previous financials are displayed in columns allowing the investors to recognise trends, monitor the success of a business and also compare it with industry rivals.
• A comparative statement further allows the preparation of a balance sheet and an income statement for better understanding.