Financial Statements

Analysis

Easy

Financial Statements

The_________________ is useful for both, intra-firm comparisons over different years and inter-firm comparisons for the same year or for several years.

Horizontal analysis

Ratio Analysis

Vertical analysis

Cash Flow Analysis

✅ Correct Option: 3

Answer: Vertical Analysis

Common size statements convert each item in a financial statement into a percentage of a common base (e.g., each Balance Sheet item as a % of total assets, or each P&L item as a % of net sales). Because everything is expressed as a proportion rather than an absolute figure, the technique works for:

Intra-firm comparison — tracking the same company's percentage figures across different years to spot structural trends.

Inter-firm comparison — comparing companies of different sizes for the same year (or across years), since percentages neutralize the effect of differing scale.

This technique is called "vertical" analysis because the comparison is done within a single column/year, moving down the statement, each item is compared vertically to the base figure from that same period.

2023: 20 June Shift 2

Match List I with List II

LIST I	LIST II
A. Horizontal Analysis	I. Common size statement
B. Vertical Analysis	II. Comparative statement
C. External Analysis	III. Access to all published and unpublished information
D. Internal analysis	IV. Access only to published information

Choose the correct answer from the options given below:

2025: 13 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Comparative Statements	(I) These are the statements which indicate the relationship of different items of a financial statement with a common item by expressing each item as a percentage of that common item.
(B) Common Size Statements:	(II) It is a technique of studying the operational results and financial position over a series of years.
(C) Trend Analysis	(III) It describes the significant relationship which exists between various items of a balance sheet and a statement of profit and loss of a firm.
(D) Ratio Analysis	(IV) These are the statements showing the profitability and financial position of a firm for different periods of time in a comparative form to give an idea about the position of two or more periods.

Choose the correct answer from the options given below:

2025: 15 May Shift 1

Which of the following indicate limitation of Financial analysis:

2022: 8 Aug Shift 2

Common size statements are the form of:

2026: 11 May Shift 1

Common size analysis is of immense use for comparing enterprises which differ substantially in size as it provides an insight into the structure of financial statements. Common Size Statements are also known as __________.

2025: 13 May Shift 1

Which statements are true-

(A) The financial statements of a business enterprise include cash flow statement.

(B) Comparative statements are the form of horizontal analysis.

(D) Financial analysis is used only by the creditors.

Choose the correct answer from the options given below:

The_________________ is useful for both, intra-firm comparisons over different years and inter-firm comparisons for the same year or for several years.

Solution

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