Question

Consider the following statements.

Statement 1 - "Common size statements and financial ratios are the two tools employed in vertical analysis."

Statement 2 - "Common size statements are also as a component percentage statement

Options

• Only statement 1 is correct

• Only statement 2 is correct

• Both the statements are correct

• None of these

Answer 1

Both the statements are correct

Explanation:

Component percentage statements, also known as common size statements, are a financial tool for analyzing major changes and trends in a company's financial situation and operational results. Each item in the statement is expressed as a percentage of the total, which includes that thing. Vertical analysis is another name for this type of analysis.