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.

Question

Quizplus · Accepted Answer

Operating income can be affected by the size of the investment, and comparing two companies based solely on this metric may not provide an accurate picture of their relative financial performance. For example, a company with a large investment may have a higher operating income than a company with a smaller investment, even if the smaller company is performing better on a per-investment basis. Therefore, it is important to consider other factors, such as return on investment or profit margin, when comparing two companies.

A Major Weakness of Comparing Two Companies Using Only Operating