Question

if two companies are in the same industry, why would one company be interested in another company's income statement?

Answer 1

Answer :-

There are various reason for which another compnay in same industry will be interested in another company's statement. Some of which are :-

1. For cost analysis :- By seeing other company statement they can analyse their cost to sales volume. By this they can determine that whether their cost are higher or lower than their competing company. And then determine that what can be the measure they can take to reduce cost to optimal level.

2. Deteremining various ratios :- By income statement they can calculate various ratios by which they can compare their own activities and identify the points where there can be improvement. ( Ration which can be seen are current ratio, liquid ratio, etc.)

3. Identify the firm economic characteristics : Like how much debt, equity is there. And in debt whether there are long term debt Or short term debt.

4. Identification of that company strategy :- For this factors such as supply chain integration, and industry diversification & geographic diversification should be considered.