When comparing operating performance across companies within the same industry, companies prefer common-sized income statements prepared through net income rather than those prepared through operating income.This is because other income and expenses are influenced by a variety of factors that are independent of operations and that can vary significantly across companies.

Question

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Common-sized income statements are typically prepared through operating income rather than net income because operating income provides a clearer view of the core operations of a company, excluding the effects of financing and other non-operational items that can vary significantly across companies.

When Comparing Operating Performance Across Companies Within the Same Industry