Comparative Ratio Analysis

Comparing the results of ratios over time helps financial managers to detect trends in a firm's financial performance / position and also compare this to rival firms in the same industry.

This information informs financial managers on what corrective actions to take in order to improve performance / position.

• Horizontal analysis: within the firm over a period of two years / periods

• Vertical analysis: within one period; comparing results across divisions / product categories

• Trend analysis: over a period of more than two years

• Benchmark analysis: comparing results against competitors / similar firms