Your boss, the CEO, asks you to analyze our company’s performance in relation to our competitors, but she only gives you a short timeframe for the project. You can do this either by comparing the firms’ balance sheets and income statements or by comparing the firms’ ratios. If you only had time to use one means of comparison, which method would you use and why? What are the drawbacks of using your selected method?

It is commonly recommended that the managers of a firm compare the performance of their firm to that of its peers. Increasingly, this is becoming a more difficult task. Explain some of the reasons why comparisons of this type can frequently be either difficult to perform or produce misleading results.