Comparative ratio analysis

• Over time 


  It’s important to look at trends in financial information over time

  Figures from at least the previous two years can indicate directions or trends and make ratio analysis more meaningful
• Standards


  Comparing results against standards that have been developed for a particular industry is also useful. This allows a business to consider how it’s performing in direct comparison to the rest of the market, giving them an idea of their level of competitiveness. Although, industry standards are general and don’t account for the individual differences of each business. So they should be used only as a guide
• Competition


  In competitive markets, businesses will often compare their financial performance to their specific competitors. This can assist them in understanding their own performance and identifying where they’re excelling and where improvements need to be made.