Extracts from Robina's financial statements show the following: Using common size analysis, with total assets as the base figure, which of the following are correct?
A. Long-term borrowings have decreased over the period covered by the financial statements relative to total assets.
B. Non-current assets have decreased over the period covered by the financial statements relative to total assets.

Question

Extracts from Robina's financial statements show the following:  Using common size analysis, with total assets as the base figure, which of the following are correct?
A. Long-term borrowings have decreased over the period covered by the financial statements relative to total assets.
B. Non-current assets have decreased over the period covered by the financial statements relative to total assets.

Quizplus · Accepted Answer

Common size analysis involves expressing each line item on the financial statements as a percentage of a common base figure, typically total assets.

A. Long-term borrowings have decreased over the period covered by the financial statements relative to total assets.
Looking at the given financial statements, we can see that long-term borrowings have decreased from 23% of total assets in Year 1 to 19% of total assets in Year 2. This represents a decrease in long-term borrowings relative to total assets, making statement A correct.

B. Non-current assets have decreased over the period covered by the financial statements relative to total assets.
Looking at the given financial statements, we can see that non-current assets have increased from 62% of total assets in Year 1 to 65% of total assets in Year 2. This represents an increase in non-current assets relative to total assets, making statement B incorrect.

Therefore, the correct answer is choice C.

Extracts from Robina's Financial Statements Show the Following: Using