FINANCIAL ANALYSIS

COMMON SIZE STATEMENTS

Companies in the same group of activity
(Eg., Textiles, chemicals, cement etc.,) try
to analyse one’s own performance vis-à-vis
others.
1. In the case of balance sheet, each item of
asset and liability is expressed as % of total
assets and liabilities respectively
2. In the case of income statement, “Sales” is
taken as 100 and other items of income and
expenses are expresses as % of sales
 ILLUSTRATION
LIABILITIES ABC Ltd XYZ Ltd

Share Capital 1,00,000 7,00,000

Reserves & Surplus:

General reserve
50,000 2,50,000
Profit & Loss a/c
10,000 2,10,000
Long term loans 70,000 2,00,000

Current liabilities:
Outstanding expenses O 12,000

0 35,000
Creditors 86,000 2,50,000

Provision for Income tax 20,000 75,000

Total 3,36,000 17,32,000

 Balance sheets as on 31 March
ASSETS ABC Ltd XYZ Ltd
Fixed assets 2,11,000 12,00,000
Less depreciation: 55,000 2,50,000
1,56,000 9,50,000
Investment 60,000 1,80,000

Current assets:
Cash & bank balance 60,000 65,000
Stocks 30,000 2,70,000
Debtors 30,000 2,45,000
Prepaid expenses 0 12,000
Miscellaneous 0 10,000
expenditure
Total 3,36,000 17,32,000
 TREND ANALYSIS

To ascertain the arithmetical relationship of

an asset, liability, income or expenditure in
a few years – with the similar item/s in a
base year
 Illustration
Sales 2005 2006 2007 2008 2009 2010

Rs.
In lacs 1672 1789 1873 1923 2123 1453
 Solution
Sales 2005 2006 2007 2008 2009 2010

+/-
in % = 0 +7 +12 +15 +27 -12.5
(Base
year
2005)
Solution contd..
Sales 2005 2006 2007 2008 2009 2010

Trend
in % = 100 107 112 115 127 -12.5
(Base
year
2005)