If a firm's common-size income statement shows that the earnings after tax percentage is too low, the firm may have spent too much money on ____.
A) total assets as a percentage of long-term liabilities
B) expenses as a percentage of current assets
C) cost of sales as a percentage of net sales
D) taxes paid as a percentage of stockholders' equity

Question

Quizplus · Accepted Answer

If the earnings after tax percentage is too low, it means that the firm's expenses are eating up a large portion of its revenue. Cost of sales as a percentage of net sales can indicate whether the firm is spending too much on producing its products or services, leading to a lower net income.

If a Firm's Common-Size Income Statement Shows That the Earnings