Comparative statements are financial statements that allow for easy comparison of line items from different time periods. They are useful for analyzing sales and production costs, and can be used by any organization dealing with finances.
Comparative statements are financial statements that cover a different time period, but are formatted in a way that makes comparing line items from one period to those from a different period an easy process. This quality means that the comparative statement is a financial statement that lends itself well to the comparative analysis process. Many companies use standardized formats in accounting functions that make generating this type of statement quick and easy.
The benefits of a comparative statement are varied for a corporation. Due to the uniform format of the statement, it is a simple process to compare the gross sales of a given product or all of the company’s products with the gross sales generated in a prior month, quarter or year. Comparing revenue generated from one period to a different period can add another dimension to sales effort effectiveness analysis, as the process allows trends such as a drop in revenue despite an increase in units sold to be identified.
In addition to being a great way to further understanding the success of the sales effort, a comparative statement can also help address changes in production costs. By comparing line items listing raw material spend in one quarter to another quarter in which the number of units produced is similar, it is possible to spot trends in spend increases and therefore help isolate the source. of those increases. This type of data can be useful in allowing the company to find raw materials from another source before rising material prices reduce the company’s overall profitability.
A comparative statement can be useful to almost any organization that has to deal with finances in any way. Even nonprofit organizations can use this method to determine trends in annual fundraising efforts. By using the comparative statement for the most recent effort and comparing the numbers to the previous year’s event, it is possible to determine where expenses increased or decreased and provide an idea of how to plan for next year’s event.
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