A major weakness of comparing two companies using only operating incomes as the basis of comparison is that it ignores the differences in the size of the investment and therefore any concept of yield or return on investment.

Question

Quizplus · Accepted Answer

Operating income alone does not take into account the size of the investment made by the companies. Therefore, comparing only operating incomes can lead to misleading conclusions about the financial performance of the companies. Yield or return on investment should also be considered to have a more accurate comparison.

A Major Weakness of Comparing Two Companies Using Only Operating