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Explain the term 'Common-size statements' in financial statement analysis?

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Question added by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER
Date Posted: 2016/02/04
Mahmoud Hamid
by Mahmoud Hamid , Finance Manager , Experts

It's used to display the statement line items as a percentage of one selected item. For example we can prepare the common size income statement by displaying the different line items as a percentage of revenue. Or we can use the common-size balance sheet to display the different assets/liabilites itmes as percentages of total assets/liabilities. It helps to analyze the statements over time.

Anneli Roosi
by Anneli Roosi , Agent customer service , DFDS AB

Reveal changes in the relative magnitude of each financial statement item. It focuses on percentage of change, not money amounts.

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