The calculations for some profitability ratios are the same as the calculations for common-size analysis of the income statement.Which of the following profitability ratios would also be determined through a common-size analysis of the income statement?
A) gross profit ratio
B) debt-to-equity ratio
C) acid-test ratio
D) earnings per share

Question

Quizplus · Accepted Answer

The gross profit ratio can be determined through common-size analysis by dividing gross profit by total revenue, which are both expressed as percentages of sales. The other options (debt-to-equity ratio, acid-test ratio, earnings per share) cannot be calculated through common-size analysis as they involve comparing different items on the financial statements, such as total debt to total equity or net income to number of shares outstanding.

The Calculations for Some Profitability Ratios Are the Same as the Calculations