What Are The Advantages And Disadvantages Of Ways Of Comparing Size Of Businesses?


2 Answers

Lily James Profile
Lily James answered
Comparing by number of employees:

- The advantage is that the company is considered good in R&D and Human Resources as the employees are large in number. It works specially in case of multinational global organizations.
- The disadvantage is that comparing the company with size of employees is not a true reflection of the size of its business. The employees could be less efficient like in case of many public sector organizations.

Comparing by value of output & sales:

- The advantage is the accuracy of judgment because the higher the number of sales the higher is the market share of that company.
- The disadvantage is that sometimes a company is excelling high on sales but eventually face losses due to higher costs and less profit margins. Then the sales value is misleading.

Comparing by profit:

- The advantage is true depiction of the size of business. Comparing the profits of other businesses and finding the share of your own company.
- The disadvantage could be that the company is new in the business with less number of employees and less sales but earned huge profits in the start. Then the figure could be misleading.

Comparing by Capital employed:

- The advantage could be from the eyes of shareholders. The higher the capital employed the more is the potential in the business compared with taking loans from banks.
- The disadvantage could be inefficiency of business to provide profitable results even after applying the capital.

Karl Sagan Profile
Karl Sagan answered

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