The financial comparison analysis takes into account the performance of a company with relation to the current economy and market competitors. The analysis takes into account the performance of the company based on the profit generation and also this is compared to the competitive firms and their revenue. There is a need to check in the variability of returns and also compare that with the stats of other firms as well.

There is also a need to ensure that there is less risk involved in terms of the financial investment is concerned. This analysis is done primarily to appeal clients and shareholders about the financial stability of the company. There is a need to be thorough and provide detailed inspection of the finances pertaining to a country.

It becomes important to also make sure the project has been allotted the working capital as decided prior to its commencement. The financial comparison analysis must not hinder with the production once it starts.

Sample Financial Comparison Analysis

Company Name: Cogs and Logs Ltd.

Analysis by: Hugh Gross

Financial period: 2012-2013

Financial Performance of the Company:

Capital: $34,000

Total Assets: $20,000

Liabilities: $23,000

Additional Expense: $5,000

Profit/ Loss: (-) 0.3%

Financial Comparison Performance Report:

  • This firm has no impact on the market in comparison to its competitors.
  • In the presence of asset specificity of the company and environmental uncertainty, a merger of firms can reduce the overall covariance with market wide factors by physically and legally combining. This is because the systematic risk of the firm is the covariance of the firm’s returns with the market’s returns, adjusted for the variation in the market return.
  • A smaller ratio, therefore, implies a lower level of systematic risk. This reduction in systematic risk is made possible only when there is a formal integration of the assets of the two firms.

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