Write the difference between comparative analysis and common size analysis.

The major differences between comparative analysis and common size analysis are as follows −

Comparative analysis

• It shows previous financial results side by side along with its change in amount/percentage.

• It compares current year results with its base year.

• It’s a horizontal analysis.

• The results are expressed in both percentages and pictorial form.

• Both inter and intra firm can be compared.

• It helps in internal decision making.

• It is useful to compare results with its previous financial years.

• Relative importance of individual figures can’t be shown in statement with comparative analysis.

Common Size analysis

• It shows results regarding same year in the form of percentages.

• It compares figures of same year.

• It’s a vertical analysis.

• The results are expressed in percentages only.

• Only inter firm are compared.

• It prepares as references to stakeholders.

• It is used to compare companies results with its competitors.

• Shows relative importance of individual figures in statement.