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Question
Under which tool of Financial Statement Analysis, 100% is taken as base and all other related items are expressed as a percentage of the base?
Options
Comparative Statement.
Ratio Analysis.
Common-size Statement.
Cash Flow Statement.
MCQ
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Solution
Common-size Statement.
Explanation:
In a Common-size Statement, a vertical analysis tool is used where a common financial figure is taken as the baseline and assumed to be 100%. All other items within that financial statement are then expressed as a percentage of this base value, such as taking Total Assets or Liabilities as the base in a Balance Sheet or Net Revenue from Operations as the base in a Statement of Profit & Loss, to analyze structural changes easily.
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