What does variance analysis help businesses to assess?

Variance analysis serves as a critical tool for businesses to evaluate the differences between expected and actual financial performance. This process involves examining the variances, or discrepancies, that arise when comparing budgeted figures to the actual financial outcomes. By identifying these variances, businesses can gain insights into their operational efficiency, financial management, and overall performance.

Understanding why variances occur allows organizations to pinpoint areas that may need improvement, such as cost overruns in certain departments or underperformance in sales. This analysis not only highlights where the business is falling short of its goals but also aids in forecasting and future budgeting, making it an essential part of effective financial management.

The other options do not accurately reflect the primary purpose of variance analysis. Marketing strategies, industry comparisons, and competitor pricing focus on aspects outside the core function of variance analysis, which is fundamentally about measuring and explaining financial performance against expectations.