Of the items listed below,the one most helpful in the comparison of different size companies is:
A) horizontal analysis
B) comparison of their net incomes
C) preparation of common-size financial statements
D) comparison of their working capital balances

Question

Quizplus · Accepted Answer

Preparation of common-size financial statements is the most helpful in the comparison of different size companies because it presents financial information in a standardized form, making it easier to compare companies of different sizes. This allows for meaningful analysis and identification of strengths and weaknesses in each company's financial performance. Horizontal analysis (A) is useful for comparing a company's performance over time but may not provide meaningful data when comparing companies of different sizes. Comparison of net incomes (B) does not take into account differences in revenue, expenses, or capital structure, making it difficult to draw meaningful conclusions. Comparison of working capital balances (D) may be influenced by factors outside of a company's control, such as industry trends, making it difficult to use as a sole basis for comparison.

Of the Items Listed Below,the One Most Helpful in the Comparison