Practicing Success
____________ studies the key changes and trends in financial position and operational result of a company. |
Component percentage statement Balance Sheet Record facts Postulates |
Component percentage statement |
The correct answer is option (1) : Component percentage statement A Common Size Statement, also referred to as a component percentage statement, is a financial tool used to analyze significant shifts and patterns in a company's financial position and operational performance. In this statement, each element is presented as a percentage of the total, typically based on the company's revenue from its operations. For instance, a common size balance sheet displays the percentage of each asset relative to the total assets, and the percentage of each liability relative to the total liabilities. Similarly, in the common size income statement, expenses are presented as a percentage of the revenue generated from operations. When such a statement is created for multiple time periods, it reveals how these percentages have changed over time. |