Write the difference between comparative analysis and common size analysis.

Banking & FinanceManagementCompanies/Organisations

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.

raja
Published on 25-Jul-2020 10:37:45
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