Question

What is meant by a ‘common size statement’?

What are common size statements?

Answer 1

Common size statements are the statements that depict the relationship between various items of financial statements with some common base (net sales or total of assets) in percentage terms. The common size statements consist of two types of statements namely, common size income statements and common size balance sheet.

Answer 2

In a common size statement, each component of a financial statement is expressed as a percentage of a common base. For example, in a profit and loss statement, the revenue from operations is considered a common base, and in a balance sheet, the total assets are considered a common base.