What is the difference between 'inter-firm comparison' and 'intra-firm comparison'? Explain the usefulness of ratio analysis in inter-firm comparison.

An inter-firm comparison indicates the efficiency of production and selling, adequacy of profits, weak spots in the organisation, etc. and thus demands from the firm's management an immediate suitable action. Intra-firm comparison means comparison among different units/products/strategic business unit (SBU) of a firm. This comparison is possible only when uniform costing methods and practices are being adopted by all units and SBUs. Inter-firm comparison may enable the management to challenge the standards which it has set for itself and to improve upon them in the light of the current information gathered from more efficient units. Intra firm comparison helps the management in identifying the units/Strategic SBUs which have not been performing as per the internal benchmark or standards achieved by other units SBUs. Ratio analysis is an accounting tool to present accounting variables in a simple, concise, intelligible and understandable form. A firm would like to compare its performance with that of other firms and of industry in general. The comparison is called inter-firm comparison. The accounting language simplified through ratios is the best tool to compare the firms and divisions of the firm.