interfirm comparison


Also found in: Medical.

interfirm comparison

the comparison of one firm's accounting results with those of other firms in the same or similar industries. Such comparisons require the summarization of PROFIT-AND-LOSS ACCOUNT and BALANCE SHEET data in the form of ACCOUNTING RATIOS so that comparisons can be made between firms. Some industry trade associations and commercial organizations, such as the Centre for Interfirm Comparisons, operate industry-wide interfirm comparison schemes, whereby firms submit their accounting results on a confidential basis and receive in return information about their major competitors, these competitors being anonymously labelled company A, company B, etc. Alternatively a firm may use the published ANNUAL REPORT AND ACCOUNTS of competitors for comparison.

Interfirm comparisons allow a company's managers to gauge their comparative performance and are a useful adjunct to historical comparisons which merely look at the company's own performance over time. See BENCHMARKING.