Question

Prepare a Common Size Balance Sheet of ZXT Ltd. from the following information:

Hint:

To prepare a Common Size Balance Sheet, express every item as a percentage of total assets or total liabilities. This allows comparison between years or across firms regardless of size.

Answer 1

A Common Size Balance Sheet expresses every item as a percentage of the total balance sheet figure (i.e., total assets or total liabilities).
It helps in analysing the proportion of each item and comparing across years.
Here, the base (total) is: 
- For 2023: ₹ 20,00,000
- For 2024: ₹ 50,00,000
We compute each item as:
Common Size % = (Item Value ÷ Total) × 100

Common Size Balance Sheet of ZXT Ltd.
(as at 31^st March, 2024 and 31^st March, 2023)

 

Particulars	31.03.2024 (%)	31.03.2023 (%)
I. Equity and Liabilities
1. Share Capital	(30,00,000 ÷ 50,00,000) × 100 = 60%	(10,00,000 ÷ 20,00,000) × 100 = 50%
2. Long-term Borrowings	(16,00,000 ÷ 50,00,000) × 100 = 32%	(8,00,000 ÷ 20,00,000) × 100 = 40%
3. Current Liabilities	(4,00,000 ÷ 50,00,000) × 100 = 8%	(2,00,000 ÷ 20,00,000) × 100 = 10%
Total	100%	100%
II. Assets
1. Non-Current Assets (PPE & Intangibles)	(30,00,000 ÷ 50,00,000) × 100 = 60%	(14,00,000 ÷ 20,00,000) × 100 = 70%
2. Current Assets (Inventory)	(20,00,000 ÷ 50,00,000) × 100 = 40%	(6,00,000 ÷ 20,00,000) × 100 = 30%
Total	100%	100%

Interpretation:
In 2023, the company had a higher dependence on long-term assets (70%) and borrowed funds (40%).
In 2024, the company shifted towards greater equity financing (60%) and increased inventory (from 30% to 40%), suggesting expansion in operations and stock levels.
Current liabilities remained a small component across both years.