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CMA Intermediate · Financial Management and Business Data Analytics · Comparative, Common-Size Financial Statements and Trend Analysis

Sharma Textiles Ltd reports revenue from operations of ₹8,00,000, cost of materials consumed of ₹4,40,000 and other expenses of ₹1,20,000. In a common-size statement of profit and loss with revenue as the base, what percentage does cost of materials consumed represent?

Cost of materials consumed is 55% of revenue. A common-size statement divides each item by the base figure, revenue, and multiplies by 100, so 4,40,000 divided by 8,00,000 gives 0.55, which is 55 percent.

  1. A45%
  2. B55%Correct
  3. C15%
  4. D35%

Explanation

In a common-size statement each item is expressed as a percentage of the base, here revenue. 4,40,000 / 8,00,000 x 100 = 55%. The 45% option is the balance left after deducting materials, not the materials percentage. Check: 55% of 8,00,000 = 4,40,000.

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