Question

Give any two uses of common size statements.

Give one use of a common size statement.

Answer 1

Two uses of common size statements are:

1. They present the change in various items in relation to revenue from operations, total assets, or total liabilities, which is not shown in comparative financial statements.
2. They provide a common base for comparison, allowing the financial statements of different firms to be converted into a uniform common-size format, facilitating comparison of profitability and financial position over time.