Question

PEER GROUP ANALYSIS.

As a financial manager, how might you use the results of peer group analysis to evaluate the performance of your firm? How is a peer group different from an aspirant group?

Answer 1

Peer group analysis will be involving comparing the operational performance and financial ratios of a particular company to the whole industry and its contemporaries who are operating in the same line of business.

Comparison of performance of firm to its peers will be helping the financial manager in order to analyse and evaluate some aspect of operations of the company and financing and investment activities of the company along with adjustment of several ratios.

financial manager will be trying to evaluate the performance of the company in relation with the peers in order to manage better control system and achieve the objectives of the company through better efficiency and better effectiveness by adopting to the industry standard.

Aspirant group are a set of companies whose performance would be likely to replicated by the company so financial manager would be using the financial ratios of aspirant group as target resource for the company and managers will be evaluated by how well they are able to match the performance of the company to the identified aspirant company.

So, it can be said that the aspirant group is different from the peer group because aspirant group is benchmark for the company and aspirant group performance would likelylikely to be replicated by the company.