Accounting – 6.3 Inter-firm comparison | e-Consult

Absolute figures are the raw numerical values presented in a financial statement. They represent the actual amounts of money involved. Relative figures are calculated by expressing absolute figures as a percentage or ratio. They are useful for comparing different companies or different periods for the same company.

Using only absolute figures can be misleading when comparing two companies because it doesn't account for differences in size or scale. Example:

If we only look at the absolute revenue figures, it might seem like Company B is significantly larger than Company A. However, without further analysis, we cannot determine which company is more successful. Company A might have a higher profit margin, making it more profitable despite having lower revenue. Relative figures, such as market share or profit margin, would provide a more accurate comparison.