A Company : A Little Bit Different From The Last

1997 Words8 Pages
Every company is a little bit different from the last. They produce different products, or provide different services. Some companies are small town corporate start-ups, while others are giant national mega-conglomerates. Amidst all the potential differences, however, there is one large similarity. The Generally Accepting Account Principles (GAAP). When it comes down to it, all companies are playing by the same rules. Some rules can apply more to one company than another, but everyone uses the same rulebook. GAAP tells a company how to record, calculate, explain, or present anything and everything that could ever possibly occur. Since every company is different, how can they fairly present their information the same way? The largest companies would be at an advantage; they would be reporting the biggest numbers among anyone. How could a smaller company even be compared? Thankfully, the kind old men behind GAAP thought of this and opted to include ratios. Ratios, through an otherworldly magic known to some as division, makes companies relative and comparable. To demonstrate this, imagine you and friend are going fishing. Using a single fishing pole, you manage to catch 4 fish. Your friend, using three fishing poles, manages to catch six fish. Because they have a larger operation, your friend initially seem more successful. They caught more fish than you. However, using ratios, we learn that might not be the case. Since, using three poles, they caught six fish, we can say that

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