Use of common size statement:
- Common size analysis reveals the sources of capital and all other sources of funds and the distribution or use or application of the total funds in the assets of a business enterprise.
- Comparison of common size statements over a number of years will clearly indicate the changing proportions of the various components of assets, liabilities, costs, net sales and profits.
- Comparison of common size statements of 2 or more enterprises in the same industry or that of an enterprise with the industry as a whole will assist corporate evaluation and ranking.
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