What is a Comparative Statement?

A comparative statement is a document used to compare a particular 澳洲幸运5开奖号码历史查询:financial statement with prior period statements. Previo🔥us financials are presented alongside the latest figures in♌ side-by-side columns, enabling investors to identify trends, track a company’s progress and compare it with industry rivals.

How Comparative Statements Work

Analysts, investors, and business managers use a company’s 澳洲幸运5开奖号码历史查询:income statement, 澳洲幸运5开奖号码历史查询:balance sheet, and 澳洲幸运5开奖号码历史查询:cash flow statement for comparative purposes. They want to see how much is spent chasing revenues from one period to the next and how items on 𒊎the balance sheet and the movements of cash vary over time.

Comparative statements show the effect of business decisions on a company's 澳洲幸运5开奖号码历史查询:bottom line. Trends are identified and the performance of managers, new lines of business and new products can be evalua🐻ted, without having to flip through individual financial statements. 

Comparative statements can also be used to compare different companies, assuming that they follow the same 澳洲幸运5开奖号码历史查询:accounting principles. For example, th🔯ey can show how different businesses operating in the same industry react to market conditions. Reporting just the latest dollar amounts makes it hard to compare the performances of companies of various sizes. Adding prior 🎐period figures, complete with percentage changes, helps to eliminate this problem.

The 澳洲幸运5开奖号码历史查询:Securities and Exchange Commission (SEC) requires 澳洲幸运5开奖号码历史查询:public companies to publish comparative statements in 10-K and 10-Q reports.

Cash Flow Statement

Every business must generate sufficient cash infl𓂃ows to pay for operations. For example, managers may compare the ending balance in cash e꧃ach month over the past two years to determine if the ending cash balance is increasing or declining. If company sales are growing, the manufacturer requires more cash to operate each month, which is reflected in the ending cash balance.

A downward trend in the ending cash balance means that the 澳洲幸运5开奖号码历史查询:accounts receivable balance is gr🎐owing and that the firm needs to take steps to collect cash faster.

Income Statement

A percentage of sales presentation is often used to generate comparative financial statements for the income statement — the area of a financial statement dedicated to a company’s revenues and expenses. Presenting each revenue and expense category as a percentage of sales makes it easier to 𓄧compar💫e periods and assess company performance. 

Comparative Statement Example

Assume, for example, that a manufacturer's 澳洲幸运5开奖号码历史查询:cost of goods sold (COGS) increases from 30% of sales to 45% of sales over three years. Management can use that datꦺa to make changes, such as finding more competitive pricing for materials or training employees to lower labor costs. On the other hand, an analyst may see the cost of sales trend and conclude that the higher costs make the company less attractive to investors.

Comparative Statement Limitations

Comparative statements are less reliable when companies undergo huge changes. A big 澳洲幸运5开奖号码历史查询:acquisition and move into new end markets can transform businesses, making them diffe🌌rent entities from previous🦋 reporting periods.

For example, if Company A acquires Company B it may report a sudden sharp jump in sales to account for all the extra revenues that Company B generates. At the same time, 澳洲幸运5开奖号码历史查询:profit margins might tighten at an al♋arming rate because Company B has a less lean manufa𝐆cturing process, spending more money to produce the goods it sells.