Distinguish between a Comparative Statement and a Common-Size Statement.

Question

Accepted Answer

| Basis | Comparative Statement | Common-Size Statement |
|---|---|---|
| What it shows | Change in each item BETWEEN two or more periods | Each item's proportion WITHIN a single period, relative to a common base |
| Base used | The earlier/preceding period's own figure for that item | A single common base figure for the whole statement (Revenue from Operations, or Total Assets) |
| Best suited for | Studying trend/direction of change over time for the SAME firm | Comparing the internal structure of TWO OR MORE firms of different sizes, or the same firm's own structure across years |
| Typical question answered | "By how much, and how fast, did this item change?" | "What proportion of revenue/total assets does this item represent?" |
| Number of periods needed | At least two | Can be prepared for even a SINGLE period on its own (though comparing several is more useful) | …

Q.Distinguish between a Comparative Statement and a Common-Size Statement.

Concept understanding — Common-Size Statements

Q.Distinguish between a Comparative Statement and a Common-Size Statement.

Concept understanding — Common-Size Statements

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