Parative Common Size

Analysis of financial
statements
Index Click On The Topic
1. Introduction to analysis of financial statement
2. Comparative statement
3. Common size statement

Meaning
The process of evaluation of the financial
information contained in the financial statements
in order to understand and make decisions regarding

the operations of the firm
is called ‘financial statement analysis’.

Objectives of Financial Analysis
Judge the ability of the firm to repay
its debt and assessing the
short-term as well as the long-term liquidity position of the

firm.
Assess the current profitability and operational

efficiency
of the firm as a whole as well as its different

departments
so as to judge the financial health of the firm

Comparing the financial statements of various firms,
an economist can judge the extent
of concentration of economic power and drawback in the

financial policies pursued.
Key for many governmental actions relating to licensing,

controls, fixing of prices,
ceiling on profits,
dividend freeze, tax subsidy and other concessions
to the corporate sector.

Limitations of analysis of financial
statements
I
Ignore price-level changes
D
Different accounting practices
E
Effected of personal ability and bias
A
Affected by window dressing
Ignore Price-level Changes
Analysis is based on stable money measurement principle.
A change in the price level makes analysis of financial

statement of different
accounting years meaningless because accounting records

ignore changes in value of money.
Different Accounting Practices
There are differing accounting policies for
valuation of stock, calculation of depreciation, treatment

of intangibles, etc. available for various aspects of
business transactions.
Valid comparison of their financial statements is not

possible
Effected by Non-monetary Aspects
Accounting provides information about quantitative (or
monetary) aspects of business.
It reflects only the monetary aspects,
ignoring completely the non-monetary (qualitative) factors.

.
Affected by personal judgment
Accounting data “reflect a combination of recorded facts,
accounting conventions and personal judgments .
Thus, the financial statements may not reveal the true

state of affairs and so the analysis
will also not give the true picture.

Tools of Financial Analysis
Ratio Analysis
Comparative Statement
Common Size Statement
Cash Flow Statement

Ratio Analysis
It describes the significant relationship which
exists between various items of a balance sheet and a

profit and loss account of a firm.
 It is possible to assess the profitability, solvency and

efficiency of an enterprise through the technique of ratio
analysis
Cash Flow statement
Cash Flow Statement is a statement,
which describes the

inflows (sources)
and
outflows (uses) of cash
and cash equivalents during a specified period.

Comparative Statements
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.
 It usually applies to the two important financial

statements, namely, balance sheet and income statement
prepared in a comparative form.
 Analysis is also known as ‘horizontal analyses.

Common Size Statements
Indicate the relationship of different items of a financial
statement with some common item by expressing each item
as a percentage of the common item.
Useful, both, in intra-firm comparisons over different

years and also in making inter-firm comparisons for the
same year or for several years.
 Known as ‘vertical analyses.

Comparative
Statements
Preparation of comparative statements
Particulars Note 2010-11 2011-12 Absolute % (increase/

No. Change Decrease
(Increase/
Decrease)
1 2 3 4 5
A B C=(B-A)
DATA
Total
Difference
Items Figure of Figure of
between
Statement previous current
current and
Of P/L Acc year are year are
Are entered previous
entered entered
year

No. Change Decrease
(Increase/
Decrease)
1 2 3 4 5
A B C=(B-A)
Revenue from Operations 10,00,000 15,00,000 5,00,000 50
Total
Absolute change
Difference Percentage change = x 100
expressed Amounts of previous year
in
percentage 5,00,000
= x 100
10,00,000
= 50

No. Change Decrease
(Increase/
Decrease)
1 2 3 4 5
A B C=(B-A)
Total
NOTE:-
As per the guidelines ( Circular no 43 dated 2nd
July by C.B.S.E ) previous year is taken first and
than current year)
Format Of comparative statement Balance Sheet
( Liability Side)

No. Change Decrease
(Increase/
Decrease)
A B C=(B-A)
Equity And Liabilities

1. Shareholders funds
a) Share capital
b) Reserves and Surplus
2. Non-Current Liabilities
a) Long-term borrowings
b) Long-term provisions
3. Current Liabilities
a) Short-term borrowings
b) Trade payables
c) Other current liabilities
d) Short-term provisions
Total
Format Of comparative statement Balance Sheet
( assets Side)

No. Change Decrease
(Increase/
Decrease)
A B C=(B-A)
ASSETS
1. Non-Current Assets
a) Fixed Assets
a) Tangible assets
b) Intangible assets
b) Non-current investments
c) Long-term loans and advances
2. Current Assets
a) Current investments
b) Inventories
c) Trade receivables
d) Cash and cash equivalents
e) Short-term loans and advances
f) Other current assets
Total
Prepare Comparative Statement of Balance Sheets from the following:
Particulars Note No. 31.03.2012` 31.03.2011`

1. 2. 3. 4
Equity and Liabilities
1. Shareholders’ funds
(a) Share capital 10,00,000 5,00,000
(b) Reserves and Surplus 2,00,000 3,00,000
Long term borrowings 8,00,000 5,00,000
Trade payables 4,00,000 2,00,000
TOTAL 24,00,000 15,00,000

II. ASSETS
(1) Non-Current Assets
(a) Fixed Assets
(i) Tangible assets 14,00,000 8,00,000
(ii) Intangible assets 3,00,000 2,00,000
(2) CURRENT ASSETS
(a) Inventories 5,00,000 4,00,000
(b) Cash and cash equivalents 2,00,000 1,00,000
TOTAL 24,00,000 15,00,000
Particulars Note 2010-11 2011-12 Absolute %
No. Change (increase/
(Increase Decrease
/Decrease)
1 2 3 4 5
A B C=(B-A)
a) Share capital 5,00,000 10,00,000 5,00,000 100
b) Reserves and Surplus 3,00,000 2,00,000 (1,00,000) (33.3)
5,00,000 8,00,000 3,00,000 60
a) Trade payables 2,00,000 4,00,000 2,00,000 100
Total 15,00,000 24,00,000 9,00,000 60

ASSETS
a) Fixed Assets
8,00,000 14,00,000 6,00,000 75
b) Tangible assets
c) Intangible assets 2,00,000 3,00,000 1,00,000 50
2. Current Assets
d) Inventories 4,00,000 5,00,000 1,00,000 25
e) Cash and cash equivalents 1,00,000 2,00,000 1,00,000 100
Total 15,00,000 24,00,000 9,00,000 60

Prepare Comparative Statement of Balance Sheets from the following:
Particulars Note No. 31.03.2012` 31.03.2011`

1. 2. 3. 4
Equity and Liabilities
(a) Share capital 3,300 2,800
(b) Reserves and Surplus 1,400 1,000
Long term borrowings 5,10 6,00
Short term borrowings 860 6,00
Trade payables 4,30 250
TOTAL 65,00 5,250
II. ASSETS
(a) Fixed Assets
(i) Tangible assets 3,630 2130
(ii) Intangible assets 1,100 1,500
(2) CURRENT ASSETS
(a) Inventories 1,400 1,280
(b) Cash and cash equivalents 370 3,40
TOTAL 65,00 5,250
(Increase Decrease
/Decrease)
A B C=(B-A)
a) Share capital 28,00 3,300 5,00 17.86
b) Reserves and Surplus 1,000 14,00 4,00) 40
600 5,10 (90) (15)
a) Short term borrowing 600 860 260 43.3
b) Trade payables 250 430 180 72
Total 5250 6500 1250 23.81

ASSETS
a) Fixed Assets
2130 3630 1500 70.42
b) Tangible assets
c) Intangible assets 1500 1100 (400) (26.67)
2. Current Assets
d) Inventories 1280 1400 120 9.38
e) Cash and cash equivalents 340 3,70 30 8.82
Total 5250 6500 1250 23.81

Format Of comparative statement of profit and loss account
Particulars Note Absolute Amount Change ( Base Year

No. 2011)
31st 31st Absolute %
March March, Change (increase/
2010- 2011- (Increase/ Decrease
2011 2012 Decrease)
I. Revenue from Operations
II. Other Income

Total Revenue (I + II)
Expense
Cost of Materials Consumed
Employees Benefits Expenses
Finance Costs
Depreciation and Amortization
Expenses
Total Expenses
Profit before tax
TAX
Profit after tax
Prepare Comparative Statement of Profit & Loss from the following:
Particulars Note 31.03.2012 31.03.2011

No.
Revenue From Operations 75,00,000 60,00,000
Other Income 1,20,000 1,50,000
Expenses 50,60,000 44,00,000
Income Tax 40% 35%

(Increase/ Decrease
Decrease)
1 2 3 4 5
A B C=(B-A)
I. Revenue from Operations 60,00,000 75,00,000 15,00,000 25
II. Other Income 1,50,000 1,20,000 (30,000) (20)
Total Revenue (i+ii) 61,50,000 76,20,000 14,70,000 23.90
Less Expenses 44,00,000 50,60,000 6,60,000 15

Profit before Tax 17,50,000 25,60,000 8,10,000 46.29
Less:- Tax 6,12,500 10,24,000 4,11,500 67.18
Profit after Tax 11,37,500 15,36,000 3,98,500 35

Particulars Note 31st March 2012 31st March 2011
No
Cost of material consumed 70% of revenue 60% of revenue

from operations from operations
Other Expenses 60,000 40,000
Tax 50% of net profit

(Increase/ Decrease
Decrease)
1 2 3 4 5
A B C=(B-A)
Less expenses 6,00,000 14,00,000 8,00,000 133.3

Cost of material consumed
Other expenses 40,000 60,000 20,000 50
Total Expenses 6,40,000 14,60,000 8,20,000 128.13
Profit before tax (i-iii) 3,60,000 5,40,000 1,80,000 50

Tax 1,80,000 2,70,000 90,000 50
Profit after tax 1,80,000 2,70,000 90,000 50
Particulars Note No. 31.03.2012 31.03.2011

Revenue from 15,00,000 10,00,000
operations
Expenses 10,50,000 6,00,000
Other Income 1,80,000 2,00,000

(Increase/ Decrease
Decrease)
1 2 3 4 5
A B C=(B-A)
II. Other Income 2,00,000 1,80,000 (20,000) (10)
Total Revenue (i+ii) 12,00,000 16,80,000 4,80,000 40
Less Expenses 6,00,000 10,50,000 4,50,000 75

Profit before Tax (iii – iv) 6,00,000 6,30,000 30,000 5
Particulars 31st March 2012 31st March 2011

Depreciation 3,00,000 2,00,000
Other expenses 40,000 40,000
Finance cost( 60% of revenue
from operation
Employee Benefit Expenses 7,20,000 6,00,000
Other income 8,000 10,000
Particulars Not 2010-11 2011-12 Absolute %
e Change (increase/
(Increase/ Decrease
No.
Decrease)
A B C=(B-A)
i. Revenue From Operations 60,00,000 80,00,000 20,00,000 33.33
ii. Add :- Other Income 10,000 8,000 (2,000) (20)
Total Revenue (I+II) 60,10,000 80,08,000 19,98,000 33.24
Less :- Expenses
Employee benefit expenses 6,00,000 7,20,000 1,20,000 20
Finance expense 36,00,000 48,00,000 12,00,000 33.33
Depreciation 2,00,000 3,00,000 1,00,000 50

Other expenses 40,000 40,000 - -
Total Expenses 44,40,000 58,60,000 14,20,000 39.98

Profit before tax 15,70,000 21,48,000 5,78,000 36.82
Particulars Note 31st March 2012 31st March 2011
No
Employee Benefit Expenses 10,00,000 8,00,000
Other Expenses 100,000 2,00,000

Tax 50% 50%

(Increase/ Decrease
Decrease)
1 2 3 4 5
A B C=(B-A)
Less Employee benefit 8,00,000 10,00,000 2,00,000 25

expenses
Other Expenses 2,00,000 1,00,000 (1,00,000) (50)
Total Expenses 10,00,000 11,00,000 1,00,000 10
Profit before tax (i-iii) 6,00,000 9,00,000 3,00,000 50

Tax 3,00,000 4,50,000 1,50,000 50
Profit after tax 3,00,000 4,50,000 1,50,000 50
Common size
statement
Common Size Statements
Indicate the relationship of different items of a financial
statement with some common item by expressing each item
as a percentage of the common item.
Useful, both, in intra-firm comparisons over different

years and also in making inter-firm comparisons for the
same year or for several years.
 Known as ‘vertical analyses.

Particulars Note Absolute Amount Percentage of Revenue
No. from Operations
31st March 31st 31st March 31st
2013 March, 2013 March,
2014 2014
Revenue from Operations 24,000 30,000
Other Income 1,200 9,00
Items Of Figure of Figure of

Trading And
previous current
Statement
Of P/L Acc year are year are
Are entered entered entered
Particulars Note Absolute Amounts Percentage of
No. Balance Sheet Total
1 31st 31st 31st 31st

March March, March March,
2013 2014 2013 2014

a) Share capital 40,00,000 50,00,000 66.67 67.57
b) Reserves and Surplus 6,00,000 8,00,000 10.00 10.81
a) Long-term borrowings 12,00,000 10,00,000 20 13.51
a) Trade payables 2,00,000 6,00,000 3.3 8.11
Total 60,00,000 74,00,000 100 100
Items Of Figure of Figure of

assets and previous current
liability Are year are year are
entered entered entered
1 31st 31st 31st 31st

2013 2014 2013 2014

a) Share capital 40,00,000 50,00,000 66.67 67.57
a) Trade payables 2,00,000 6,00,000 3.3 8.11
Total 60,00,000 74,00,000 100 100
Percentage change
Share capital
= x 100
Total liability
40,00,000
= x 100
60,00,000
= 66.67
Format Of Common-size Balance Sheet ( Liability Side)

1 31st 31st 31st 31st

2013 2014 2013 2014

a) Share capital
b) Reserves and Surplus
b) Long-term provisions
a) Short-term
borrowings
b) Trade payables
c) Other current
liabilities
d) Short-term provisions
Total 100 100

Format Of Common-size Balance Sheet ( Assets Side)

1 31st 31st 31st 31st
2013 2014 2013 2014
ASSETS
a) Fixed Assets
a) Tangible assets
b) Intangible assets
b) Non-current investments
c) Long-term loans and
advances
2. Current Assets
a) Current investments
b) Inventories
c) Trade receivables
d) Cash and cash
equivalents
e) Short-term loans
and advances
f) Other current
assets
Total 100 100
Prepare a common size balance sheet.
Particulars Note 31.03.2012

No.
1. 2. 3.
I. Equity and Liabilities
(a) Share capital 30,00,000
(b) Reserves and Surplus 4,00,000
long term borrowings 10,00,000
Trade payables 6,00,000
TOTAL 50,00,000
II. ASSETS
(a) Fixed Assets
(i) Tangible assets 30,00,000
(ii) Intangible assets 6,00,000
(2) CURRENT ASSETS
(a) Inventories 10,00,000
(b) Cash and cash equivalents 4,00,000
Particulars Note Absolute Amount Percentage of
No. Balance Sheet
Total
1 2011-12 52011-12

a) Share capital 30,00,000 60
b) Reserves and Surplus 4,00,000 8
a) Long-term borrowings 10,00,000 20
a) Trade payables 6,00,000 12
Total 50,00,000 100

ASSETS
a) Fixed Assets
b) Tangible assets 30,00,000 60
c) Intangible assets 6,00,000 12
2. Current Assets
d) Inventories 10,00,000 20
e) Cash and cash equivalents 4,00,000 8
Total 50,00,000 100

Particulars
1.
Note No.
2.
G Ltd
3. 4
L Ltd
Equity and liabilities
Shareholders’ funds 3,00,000 4,00,000
Non-Current Liabilities 2,00,000 3,00,000
Current Liabilities 1,00,000 50,000
total 6,00,000 7,50,000
Non-current assets
Tangible Assets 2,50,000 3,00,000
Intangible Assets 1,50,000 1,00,000
Current Assets 2,00,000 3,50,000
Total 6,00,000 7,50,000
1 G ltd L Ltd G ltd L Ltd

Shareholders funds 3,00,000 4,00,000 50 53.33
Non-Current Liabilities 2,00,000 3,00,000 33.33 40
Current Liabilities 1,00,000 50,000 16.67 6.67
Total 6,00,000 7,50,000 100 100
ASSETS
Non-Current Assets
2,50,000 3,00,000 41.67. 40
Tangible assets
1,50,000 1,00,000 25 13.3
Intangible assets
2,00,000 3,50,000 33.33 46.67
Current Assets
6,00,000 7,50,000 100 100
Total
Particulars
1.
Note No.
2.
31.03.2014`
3.
31.03.2013`
4
I. Equity and Liabilities

(a) Share capital 50,00,000 40,00,000
(b) Reserves and Surplus 8,00,000 6,00,000
Long term borrowings 10,00,000 12,00,000
Trade payables 6,00,000 2,00,000
TOTAL 74,00,000 60,00,000
II. ASSETS
(a) Fixed Assets
(i) Tangible assets 47,00,000 40,00,000
(ii) Intangible assets 8,00,000 2,00,000
(2) CURRENT ASSETS
(a) Inventories 14,00,000 12,00,000
(b) Cash and cash equivalents 5,00,000 6,00,000
TOTAL 74,00,000 60,00,000
1 31st 31st 31st 31st

2013 2014 2013 2014

a) Share capital 40,00,000 50,00,000 66.67 67.57
a) Trade payables 2,00,000 6,00,000 3.3 8.11
Total 60,00,000 74,00,000 100 100

ASSETS
a) Fixed Assets
b) Tangible assets 40,00,000 47,00,000 66.67 63.51
c) Intangible assets 2,00,000 8,00,000 3.3 10.81
2. Current Assets
d) Inventories 12,00,000 14,00,000 20 18.92
e) Cash and cash equivalents 6,00,000 5,00,000 10 6.76
Total 60,00,000 74,00,000 100 100
Format Of Common-size statement of profit and loss
account
No. from Operations
31st 31st 31st March 31st
March March, 2013 March,
2013 2014 2014
Revenue from Operations 100 100
Other Income
Total income
Expenses
Cost of Materials Consumed
Employees Benefits Expenses
Finance Costs
Depreciation and Amortization
Expenses
Other Expenses
Total Expenses
Profit before tax

No. from Operations
2014 2014
Revenue from Operations 24,000 30,000 100 100
Other Income 1,200 9,00 5 3
Percentage
relation of
Percentage change
different items
to net
Other Income
sales( taken as = x 100
100) Revenue from Operations
1,200
= x 100
24,000
= 5
No. from Operations
2014 2014
Revenue from Operations 24,000 30,000 100 100
Other Income 1,200 9,00 5 3
Percentage change
Percentage
relation of Other Income
= x 100
different items Revenue from Operations
to net
sales( taken as 9,00
= x 100
100) 30,000
= 3
No. from Operations
2014 2014
NOTE:-
As per the guidelines ( Circular no 43 dated 2nd
July by C.B.S.E ) previous year is taken first and
Revenue From Operation is to be taken as 100%
not total revenue
Prepare a common size statement of profit & loss.
Particulars Note No. 31.03.2012

Revenue from operation 20,00,000
Employee benefit expenses 10,00,000
Other Expenses 1,00,000
Particulars Note Absolute Amount Percentage of

No. Revenue from
Operations
1 2011-12 2011-12
Revenue from Operations 20,00,000 100
Less Expenses Employee

10,00,000 50
benefit expenses
Other Expenses
1,00,000 5
Total Expenses
11,00,000 55
Profit before tax (i-iii) 9,00,000 45

Particulars Note No 31st March 2012 31st March 2011
Cost of material consumed 6,60,000 6,00,000
Employees Benefit 1,20,000 1,20,000
Expenses
Other expenses 96,000 50,000

No. from Operations
2012 2012
Revenue from Operations 10,00,000 12,00,000 100 100
Expenses:
Cost of Materials Consumed 6,00,000 6,60,000 60 55
Employees Benefit Expenses 1,20,000 1,20,000 12 10
Other Expenses 50,000 96,000 5 8

Total Expenses 7,70,000 8,76,000 77 73
Profit before tax (i-iii) 2,30,000 3,24,000 23 27
Revenue from operations 24,00,000 19,00,000
Other income 1,00,000 1,00,000
Cost of material consumed 17,00,000 14,00,000
Finance cost 2,00,000 1,60,000

Other expenses 1,00,000 1,40,000

No. from Operations
2012 2012
Other Income 1,00,000 1,00,000 5.26 4.16
Total Revenue 20,00,000 25,00,000 105,26 104.16
Expenses:
Cost of Materials Consumed 14,00,000 17,00,000 73.68 70.83
Finance Costs 1,60,000 2,00,000 8.42 8.33
Other Expenses 1,40,000 1,00,000 7.36 4.16
Total Expenses 17,00,000 20,00,000 89.47 83.33

Profit before tax (i-iii) 3,00,000 5,00,000 15.78 20.83
Revenue from operations 18,00,000 26,00,000
Expenses 17,00,000 25,08,000
Other income 2,00,000 4,00,000
Income tax 35% 40%

No. from Operations
2012 2012
Other Income 4,00,000 2,00,000 15.38 11.11
Total income 30,00,000 20,00,000 115.38 111.11
Less:- Expenses: 94.44
25,08,000 17,00,000 96.46
Profit before tax 4,92,000 3,00,000 18.92 16.67
Less:- tax 1,96,800 10,5,000 75.68 5.83
Profit after tax 2,95,200 1,95,000 11.34 10.83

Parative Common Size

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Analysis of financial

1. Introduction to analysis of financial statement

3. Common size statement

in order to understand and make decisions regarding

is called ‘financial statement analysis’.

Judge the ability of the firm to repay

its debt and assessing the

short-term as well as the long-term liquidity position of the

Assess the current profitability and operational

of the firm as a whole as well as its different

so as to judge the financial health of the firm

an economist can judge the extent

of concentration of economic power and drawback in the

Key for many governmental actions relating to licensing,

dividend freeze, tax subsidy and other concessions

to the corporate sector.

A change in the price level makes analysis of financial

accounting years meaningless because accounting records

valuation of stock, calculation of depreciation, treatment

Valid comparison of their financial statements is not

It reflects only the monetary aspects,

ignoring completely the non-monetary (qualitative) factors.

Thus, the financial statements may not reveal the true

will also not give the true picture.

Common Size Statement

Cash Flow Statement

exists between various items of a balance sheet and a

 It is possible to assess the profitability, solvency and

which describes the

and cash equivalents during a specified period.

 It usually applies to the two important financial

 Analysis is also known as ‘horizontal analyses.

Useful, both, in intra-firm comparisons over different

 Known as ‘vertical analyses.

Particulars Note 2010-11 2011-12 Absolute % (increase/

Particulars Note 2010-11 2011-12 Absolute % (increase/

Particulars Note 2010-11 2011-12 Absolute % (increase/

Particulars Note 2010-11 2011-12 Absolute % (increase/

Equity And Liabilities

Particulars Note 2010-11 2011-12 Absolute % (increase/

Particulars Note No. 31.03.2012` 31.03.2011`

TOTAL 24,00,000 15,00,000

Total 15,00,000 24,00,000 9,00,000 60

Total 15,00,000 24,00,000 9,00,000 60

Particulars Note No. 31.03.2012` 31.03.2011`

Total 5250 6500 1250 23.81

Total 5250 6500 1250 23.81

Particulars Note Absolute Amount Change ( Base Year

I. Revenue from Operations

II. Other Income

Particulars Note 31.03.2012 31.03.2011

Particulars Note 2010-11 2011-12 Absolute %

II. Other Income 1,50,000 1,20,000 (30,000) (20)

Total Revenue (i+ii) 61,50,000 76,20,000 14,70,000 23.90

Less Expenses 44,00,000 50,60,000 6,60,000 15

Profit after Tax 11,37,500 15,36,000 3,98,500 35

Cost of material consumed 70% of revenue 60% of revenue

Particulars Note 2010-11 2011-12 Absolute %

Less expenses 6,00,000 14,00,000 8,00,000 133.3

Total Expenses 6,40,000 14,60,000 8,20,000 128.13

Profit before tax (i-iii) 3,60,000 5,40,000 1,80,000 50

Particulars Note No. 31.03.2012 31.03.2011

Particulars Note 2010-11 2011-12 Absolute %