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Accounting Ratios and Common Size & Comparative Statements
Cover Page
Class 12 Accountancy Project
Topic: Accounting Ratios and Common Size & Comparative Statements
Name: __________
Class: XII Commerce
Roll No: _______
School Name: __________
Academic Year: 202425
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Accounting Ratios and Common Size & Comparative Statements
Acknowledgement
I would like to express my sincere gratitude to my Accountancy teacher, [Teachers Name], for the valuable
guidance and support throughout this project. I also thank my school and classmates for their cooperation.
[Your Name]
Class XII
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Accounting Ratios and Common Size & Comparative Statements
Certificate
This is to certify that [Your Name], a student of Class XII, has successfully completed the project on
'Accounting Ratios and Common Size & Comparative Statements' as per the CBSE curriculum under the
guidance of [Teachers Name].
Teachers Signature: ___________
Date: ___________
School Seal
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Accounting Ratios and Common Size & Comparative Statements
Index
1. Introduction
2. Accounting Ratios
3. Objectives
4. Types of Ratios
5. Common Size Statement
6. Comparative Statement
7. Solved Examples
8. Conclusion
9. Bibliography
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Accounting Ratios and Common Size & Comparative Statements
Introduction to Financial Statement Analysis
Financial statement analysis helps stakeholders assess a business's performance, financial health, and
future prospects using tools like accounting ratios, common size, and comparative statements.
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Accounting Ratios and Common Size & Comparative Statements
Meaning of Accounting Ratios
Accounting ratios are mathematical expressions that evaluate a company's financial performance using data
from financial statements.
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Accounting Ratios and Common Size & Comparative Statements
Objectives of Ratio Analysis
- Assess liquidity and solvency
- Analyze profitability
- Help in decision-making
- Identify financial strengths and weaknesses
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Accounting Ratios and Common Size & Comparative Statements
Types of Accounting Ratios
a) Liquidity Ratios
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets Inventories) / Current Liabilities
b) Solvency Ratios
Debt to Equity Ratio = Total Debt / Shareholder's Equity
Interest Coverage Ratio = EBIT / Interest Expense
c) Activity Ratios
Inventory Turnover = Cost of Goods Sold / Average Inventory
Debtors Turnover = Net Credit Sales / Average Debtors
d) Profitability Ratios
Net Profit Ratio = (Net Profit / Revenue from Operations) × 100
Return on Capital Employed = (EBIT / Capital Employed) × 100
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Accounting Ratios and Common Size & Comparative Statements
Common Size Statement
Common size statements express all items as a percentage of a base amount. Helps in analyzing vertical
structure and comparing across companies.
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Accounting Ratios and Common Size & Comparative Statements
Format of Common Size Statement
Common Size Income Statement:
Revenue from Operations: 10,00,000 100%
Cost of Goods Sold: 6,00,000 60%
Gross Profit: 4,00,000 40%
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Accounting Ratios and Common Size & Comparative Statements
Solved Example of Common Size Statement
Example:
If a company has Revenue of 5,00,000 and Net Profit of 1,00,000, then Net Profit % = (1,00,000 / 5,00,000) ×
100 = 20%
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Accounting Ratios and Common Size & Comparative Statements
Comparative Statements
Comparative statements compare financial data of two or more periods to assess trend and growth.
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Accounting Ratios and Common Size & Comparative Statements
Format of Comparative Statement
Comparative Income Statement:
Sales:
2023: 10,00,000
2024: 12,00,000
Change: 2,00,000
% Change: 20%
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Accounting Ratios and Common Size & Comparative Statements
Solved Example of Comparative Statement
Example:
If Net Profit was 80,000 in 2023 and 1,00,000 in 2024:
Absolute Change = 20,000
% Change = (20,000 / 80,000) × 100 = 25%
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Accounting Ratios and Common Size & Comparative Statements
Conclusion
This project helped me understand how accounting ratios, common size and comparative statements are
powerful tools for analyzing a company's financial position and trends over time.
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Accounting Ratios and Common Size & Comparative Statements
Bibliography
- NCERT Accountancy Textbook Part 2
- TS Grewals Double Entry Bookkeeping
- Class notes and worksheets
- www.cbseacademic.nic.in
- www.accountingtools.com
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