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Question
Main objective of common size statement of profit and loss is ______.
Options
To present changes in assets and liabilities
To judge the financial soundness
To establish relationship between revenue from operations and other items of statement of profit & loss
All of the above
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Solution
Main objective of common size statement of profit and loss is to establish relationship between revenue from operations and other items of statement of profit & loss.
Explanation:
The main objective of a common size statement of profit and loss is to express all items as a percentage of revenue from operations. This helps establish a clear relationship between revenue and other expense or income items. It facilitates analysis of changes in individual profit and loss items relative to revenue and aids in comparing cost efficiency and profitability over time or across firms.
