One way of putting financial data into a comparative context is known as financial ratio analysis. However, if you were told that a mom-and-pop grocery store made $2 million profit last year based on $4 million of sales, you would be amazed at that mom-and-pop store and hold them in considerable esteem for their management capability. Making only $2 million profit on revenues in excess of $400 billion worth of sales would not be at all impressive.
After all, if you were told that Walmart made only $2 million profit last year, you would likely be concerned with respect to the management capability and performance of Walmart. However, you are still left with the question of exactly how good that $2 million profit is. Obviously, earning a $2 million profit is better than a $1 million profit and certainly better than a $2 million loss. As an example, suppose you are told that a particular business earned $2 million worth of profit last year. These numbers must be placed in some form of context. These numbers, however, may not provide a singular insight into the overall economic effectiveness of any particular business. Both use information derived from financial statements.
Financial accounting provides information to interested external constituencies. Managerial accounting focuses on providing information that is useful for the managers of a firm. Section 9.1 "Understanding the Need for Accounting Systems" discusses the differences between managerial accounting and financial accounting. “Accounting Quotes,” Qfinance, accessed February 14, 2012, Fred Schwed But figures, when used in financial arguments, seem to have the bad habit of expressing a small part of the truth forcibly, and neglecting the other, as do some people we know.