ABSTRACT
Comparative analysis commands special attention in financial analysis as it not only facilitates understanding of year-on-year changes but also of trends in the performance and position of a company. It is often a go-to tool for competitor analysis. In this note, I illustrate the use of R (software), its allied packages, and textual analysis algorithms to extend the use of comparative analysis to “unstructured” information presented in the MD&A section of annual reports. For this use case, I consider two giant tech rivals, Apple Inc. and Amazon.com Inc., and present a comparative analysis of their MD&A section using Cosine and Jaccard similarity measures. I also compare the most important words based on tf-idf and sentiments for each company and across the two companies. When supplemented with financial information, comparative analysis can offer novel insights for analysts, managers, researchers, and academics and is a valuable tool to include in accounting curricula.
