Question

What is meant by "presentation of financial statement information in common-size amounts rather than dollar amounts?" Why is this type of presentation sometimes more meaningful than use of actual dollar amounts?

Answer 1

When instead of using dollar amounts in the financial statements if they presented in percentage form for a common base figure which means It can be shown in percentage of total revenue or previous year is called presentation of financial statement information in common-size amounts rather than dollar amounts.

It will be more useful for analysing data for previous years or two or more companies where in dollar amounts is too huge then this way of presenting of data becomes more beneficial. It provides better indicator for decision making and also for provides quick areas where improvement is required.