Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Analysis of Financial Statements

Question:

Common Size Statements are also known as:

Options:

Dynamic analysis

Horizontal analysis

Vertical analysis

External analysis

Correct Answer:

Vertical analysis

Explanation:

In Common size Statements each item on the financial statement is expressed as a percentage of a common base, typically a key figure such as total revenue or total assets. By using percentages, it becomes easier to compare the relative proportions of different items within a single period or between different companies. Vertical analysis is another name for the analysis made through the common size statements.