Final answer:
When a firm earns above average accounting performance, it does not necessarily mean that it enjoys competitive parity. In a competitive market, firms strive to outperform their competitors and gain a competitive advantage.
Step-by-step explanation:
When a firm earns above average accounting performance, it does not necessarily mean that it enjoys competitive parity. Competitive parity refers to a situation where a firm's performance is equal to its competitors, not just above average. In a competitive market, firms strive to outperform their competitors and gain a competitive advantage.
For example, if a firm earns above average accounting performance, it may be generating higher profits or achieving better financial ratios compared to other firms in the industry. However, this does not guarantee that the firm is at a competitive parity because there may be other firms that are performing even better in terms of profitability, market share, or customer satisfaction.
To determine if a firm enjoys competitive parity, it would need to analyze its performance relative to its direct competitors. This can be done by comparing key performance metrics such as market share, sales growth, customer retention, and brand reputation. If the firm's performance is on par with its competitors or it has a sustainable competitive advantage, then it can be said to enjoy competitive parity.