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Write the difference between comparative analysis and common size analysis.
The major differences between comparative analysis and common size analysis are as follows −
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.
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- Analyse the below table and prepare a common size balance sheet (one of the techniques used in financial statement analysis)
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