The main objective of common size statement of profit and loss is:

The correct answer is Option (3) → to establish relationship between revenue from operations and other items of statement of profit and loss

In a common size statement of profit and loss, revenue from operations is taken as 100 and every other item (cost of materials, employee benefit expenses, other expenses, profit) is shown as a percentage of it. Its purpose is to show how each item stands in relation to revenue from operations.

Option (1) to present change in assets and liabilities — Incorrect. Assets and liabilities are in the balance sheet, not the statement of profit and loss; and changes over time are the work of comparative statements.

Option (2) to judge the financial soundness — Incorrect. Financial soundness (solvency) is judged from the balance sheet and its ratios, not from a common size statement of profit and loss.

Option (4) All of the above — Incorrect. Options (1) and (2) are not its objective.