Common size financial statements may be constructed by calculating the percentage each line item of the income statement, balance sheet, and cash flow statement is of annual sales for each quarter or year for which historical data are available.

Question

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Common size financial statements are created by expressing each line item as a percentage of a common base, such as total assets or net sales. One common method is to calculate the percentage of each line item in relation to annual sales.

Common Size Financial Statements May Be Constructed by Calculating the Percentage