Common Size Statements

Step 1: Meaning. In P& L → Sales is base. In Balance Sheet → Total assets/liabilities is base.
Step 2: Purpose. Helps comparison across years and companies of different sizes.
Step 3: Example. If Sales = 1,00,000 and wages = 20,000, then wages = 20% of sales.
Final Answer: % Quciktip

Step 1: Meaning. In common size statement, all items are expressed as a percentage of a common base (like sales or total assets).
Step 2: Objectives. - Helps to compare two firms of different sizes. - Shows proportion of each item in relation to sales or assets, revealing structural strength.
Step 3: Example. If sales = 100 and expenses = 40, then expense ratio = 40%.
Final Answer: % Quciktip