common-size financial statements

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A method of analysing and comparing financial statements by expressing the individual elements as percentages of the total. For example, with profit and loss accounts all the costs could be expressed as a percentage of the sales figure. It is then possible to compare these percentages with those for another company or the industry average, enabling conclusions to be drawn on the performance of the company. See accounting ratio; financial statement analysis; ratio analysis.

Subjects: Accounting.

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