Mode of action of Comparative analysis

Comparative analysis

The method of comparative analysis, examines operations and indicators by comparing them with other operations and indicators adopted for base or benchmarking. In his classic forms comparative analysis method is subject to the balance sheet of the company. This is because the balance sheet has its legal conditionality. The refore, in itself, the balance of the company is a document that meets the requirements for comparability analysis. Meanwhile, the comparative method can be extended to as statements of profit and loss and cash flow statement. The most important result of using the comparative method is the detection of a trend. In parallel, comparative method applied for several years, allows to reveal the direction, strength and intensity of the established trend.

Comparative analysis

Indeed, using the comparative method within the financial analysis can be expressed by calculating one year to the next in absolute and relative terms (Video. 1). The calculation of changes within short periods easy. However, there are some methodological problems posed by the emergence of a significant amount of deviation from the current reporting feathers from the previous year. When in the previous year have a negative deviation and the current positive (or vice versa) percentage change can hardly be calculated.



A similar picture and when an item has a value in the previous year, and no one in the current and the reduction is equal to 100%. Conversely, when there is no value for the current, but only for the base year can not be calculated the percentage change. In order to improve comparative analysis method can be applied such presentation of financial statements in which to reflect the cumulative total for the period for each item studied and average amount for that period. The introduction of average amounts for the period allows to reveal factors and unusual character dynamics.

Comparative Analysis

(Video. 1)