This tool of Analysis of financial statement indicates the relationship between different items of a financial statement with a common item by expressing each item as a percentage of that common item. Identify this analysis tool.
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Shift 12/06/2023 3:30 PM - 6:30 PM
A
Comparative statement
B
Common Size statement
C
Ratio Analysis
D
Trend Analysis
Correct Answer
Common Size statement
Detailed Explanation
Common size analysis, also known as vertical analysis, is a financial analysis technique that expresses each line item in a financial statement as a percentage of a base item. This base item is typically the total revenue (for the income statement) or total assets (for the balance sheet). Common size analysis allows for the comparison of financial statements of companies of different sizes or the same company over different periods, providing insights into the relative composition of different elements.
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