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Question
Main objective of common size statement is ______.
Options
To present the changes in various items
To provide for a common base for comparison
To establish relationship between various items
All of the Above
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Solution
Main objective of common size statement is to present the changes in various items, to provide for a common base for comparison and to establish relationship between various items.
Explanation:
Common size statements not only provide a common basis for comparison by expressing each item as a percentage of a total (such as total assets or sales), but they help in presenting structural changes over time in financial items and establishing relationships between various components within the financial statement. These features make common-size statements valuable for both inter- and intra-firm analysis.
