Question

Give two objectives of a common size statement of profit & loss.

Answer 1

Two objectives of a common size statement of profit & loss are:

1. To establish a relationship between individual items of the profit and loss statement and revenue from operations, showing each item as a percentage of revenue and thereby facilitating analysis of how expenses and profits vary with sales.
2. To analyze changes in individual expense and income items relative to revenue from operations over time, aiding in understanding trends and efficiency in cost management.