What would be a major limitation of financial comparison between companies of different sizes?

A major limitation of financial comparison between companies of different sizes is the variations in accounting methods. Companies can adopt different accounting practices, such as cash basis versus accrual basis accounting, or use different methods for inventory valuation (e.g., FIFO, LIFO, or weighted average). These differences can significantly impact the financial statements, such as revenue recognition and expense reporting, thereby making it difficult to compare financial performance accurately.

For instance, one company might report higher profits due to its accounting methods while another may appear less profitable despite having similar operations. Consequently, relying solely on financial data without considering these accounting variations may lead to misleading conclusions about a company's performance compared to its peers.

While different legal structures, diverse product lines, and geographic locations can also create challenges in financial analysis, the direct impact of varying accounting methods on reported figures is a more significant and quantifiable barrier to accurate financial comparisons. Each accounting method can yield vastly different numbers, making it paramount to understand how these variations can skew financial evaluations and comparisons.