Question

Which one of the following are correct in connection with the Common Size Statement?
(A) Expressed as a percentage on revenue from operation
(B) Horizontal analysis
(C) Vertical analysis
(D) Expressed as a percentage on total assets

• A. (A), (B), and (D) only
• B. (A), (B), and (C) only
• C. (A), (C), and (D) only
• D. (B), (C), and (D) only

Answer 1

The Correct Option is C

A Common Size Statement is a financial statement in which each line item is expressed as a percentage of a base amount (like revenue or total assets).

• (A) Expressed as a percentage on revenue from operation: This is correct because the common size statement often expresses each item as a percentage of total revenue.
• (B) Horizontal analysis: This is incorrect. Horizontal analysis compares financial data over multiple periods, not typically in a common size statement.
• (C) Vertical analysis: This is correct, as vertical analysis expresses each item as a percentage of the base figure (e.g., total assets or total revenue).
• (D) Expressed as a percentage on total assets: This is correct, as common size statements can also express each item as a percentage of total assets.

Thus, the correct answer is:

(3) (A), (C) and (D) only