Which of the Following Is a Difference Between Internal Comparison

question 10

Multiple Choice

Which of the following is a difference between internal comparison and external comparison with regard to financial statement analysis?

• A) An internal comparison reveals unexpected relationships within a company, whereas an external comparison reveals the absence of expected relationships outside a company.
• B) An internal comparison involves comparing a company with the industry as a whole, whereas an external comparison involves comparing a company's current performance with its past experience.
• C) An internal comparison is done by an accountant or auditor, whereas an external comparison is done by a forensic accountant.
• D) An internal comparison allows the examination of changes within a company over time, whereas an external comparison reveals the company's relative performance and financial standing.

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Definitions:

Absolute Advantage

The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than any competitor.

Comparative Advantage

A principle that states a country or individual can produce a particular good or service at a lower opportunity cost than others.

Trade Patterns

The trends and tendencies in international trade, including what goods and services are traded, with whom, and in what direction.

Gain From Trade

The gain from trade refers to the increase in consumer and producer surplus that results from an open market, allowing countries or individuals to specialize in production and exchange.