Briefly describe the major problem that arises when benchmarking against your competitors. Describe how we can overcome this problem

What will be an ideal response?

Answer: The major problem that arises is that financial statements for firms of different sizes can present problems in comparing line items. To make comparisons easier, we restate financial statements into common-size financial statements, in which all line items are expressed as a percentage of a common base figure—for income statements, it is usually sales, and for balance sheets, it is usually total assets. In essence, we do this so that we can compare percentages and not actual numbers.