Inter-business comparison

What students must be able to do

• Identify factors that make two businesses' ratios different.
• Understand the problems of comparing businesses.
• 2026 title: inter-firm comparison, with ratios applied to the comparison.

Official wording: Cambridge IGCSE Accounting 0452: syllabus for 2027-2029 (Version 1), page 19; Cambridge IGCSE Accounting 0452: syllabus for examination in 2026 (Version 2, December 2025), page 17. See all sources.

How our teachers teach it

Comparing two businesses is only fair when they are alike. Our teachers train students to look first at size, age, policies and type of trade before drawing a conclusion. Differences in depreciation methods or inventory policy alone can move a ratio. A comparison with no caveat is usually a half-mark answer.

Mini-example: two shops, one ratio

Shop A is a small boutique with a gross profit margin of 45%. Shop B is a large supermarket with a margin of 22%. Comparing the numbers alone suggests A is twice as good, which would be a hasty conclusion.

Before comparing, list what could make the ratios differ. Type of trade: boutiques sell fewer items at higher mark-ups. Size: a supermarket buys in volume and sells quickly. Age: an older business may hold assets bought at lower prices. Policies: different depreciation or inventory valuation methods change profit without changing real performance.

A fair comparison therefore needs two things the syllabus asks for. One is the factors that explain the difference. The other is the problems in comparing at all, such as different year ends or different accounting policies. For a numerical comparison you can also work through the ratio analysis worked example and then add a sentence of caution.

A good conclusion could read: "Shop A earns more on each sale, but because the trades differ I cannot say it is better run. I would compare it with another boutique."

If any of these slips sound familiar, we can help. A teacher can mark your child's answers on inter-business comparison line by line and show where the marks go. Book a trial class.

How the wording changed for 2027

Renamed from inter-firm comparison in 2026 to inter-business comparison in 2027-2029. The 2027-2029 wording focuses on factors that affect the ratios and the problems of comparison.

Where it is examined

Inter-business comparison can appear in either paper, as a short question or as part of a longer task. Cambridge bases both papers on the whole syllabus. See the guides to Paper 1 and Paper 2 for the format.

Sources: Cambridge IGCSE Accounting 0452: syllabus for 2027-2029 (Version 1), pages 9, 22. See all sources.

Practise it

• Key terms: Working capital, Capital employed
• Worked examples: ratio analysis
• Practice questions: ratios
• One-to-one Cambridge 0452 tuition

Other sub-topics in topic 6

• 6.1 Calculation and understanding of accounting ratios
• 6.2 Interpretation of accounting ratios
• 6.4 Interested parties
• 6.5 Limitations of accounting statements