The most useful way of standardizing financial statements is to choose a _base year,_ and then express each item in the period under review relative to the _amounts____ in the base year.
Comparative financial statements compare a particular financial statement with previous statements. Previous financial statements are presented in side-by-side columns with the latest figures. With this, investors are able to track a company's progress over some periods and compare the company's financial results and performance with its industry competitors.
Thus, financial statements can be compared using financial ratios, which express the relationships between the various items within a financial statement, or using a base year.
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