A peer group analysis is a way to compare financial statements of similar companies/business to each other. By comparing the two different financial statements they evaluate the performance of each company and understand where the company's operations, finances or investments are not in line with the norm set by the peer companies. As a financial manager you can use the results of a peer analysis group to evaluate the performance of your firm by comparing your firms' operations, investment activities and finances to peer companies. This will show your company's strengths and weaknesses, helping a financial manager know where to set new goals to help set realistic goals that address their weaknesses. By completing a peer analysis, the company can use the financial ratios they gathered as their new target ratios so they can better understand what actions they may take to adjust their ratios to line up with their peers, and to better compete with their peer companies. Overall financial managers gather a great amount of data and information from a peer analysis that can help them set up their company for success.

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Peer group analysis is indeed a crucial tool for financial managers to assess their companys performance relative to similar businesses in the industry By comparing financial statements and key perfor... View the full answer