One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to
A) judge the relative potential of two companies of similar size in different industries
B) determine which companies in a single industry are of the same value
C) determine which companies in a single industry are of the same size
D) make a better comparison of two companies of different sizes in the same industry

Question

Quizplus · Accepted Answer

A common-sized statement converts all line items to a percentage of a common base, such as net sales, which makes it easier to compare companies of different sizes within the same industry. This allows for a more accurate comparison of financial performances between companies with different scales of operations.

One Reason That a Common-Sized Statement Is a Useful Tool