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How does the use of Common Size Financial Statements allow for easy comparison and how do...

How does the use of Common Size Financial Statements allow for easy comparison and how do they relate to vertical analysis of financial statements?

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Common size financial statements are those in which figures reported are converted into percentages to some common base. Therefore,items in the financial statements are presented as percentages or ratios to the total of the items. A common base for comparison is provided. Each percentage shows the relation of the individual item to its respective total. Hence, in this way, Common Size Financial Statements allow for easy comparison and vertical analysis of financial statements,which are not provided by Comparative financial statements..

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