AnAlySIS AnD FInAnCIAl RATIoS 47 how accounts are prepared using the double entry system; understand the basic layout of a profit-and-loss account and balance sheet; be able to analyse accounts and ask pertinent questions using ratio analysis as a base. Ratio analysis can become addictive, in that once you have become proficient you might find yourself comparing and analysing accounts whenever they are published. This is good practice and will enable you to make comparisons between companies and seek answers. For ex- ample, if you notice that two companies selling the same product have very different gross margins, ask why this should be. Is there a differ- ence in scale of operations? Do the companies operate in different markets? Is there a difference in the quality of what appear to be similar products? Is one company more efficient than the other? Is there a difference in brand strength? This type of approach will enable you to gain a better understanding of the industry sector and help you make better executive decisions.