Common-size financial statements represent a form of:
A) ratio analysis
B) vertical analysis
C) trend analysis
D) horizontal analysis

Question

Quizplus · Accepted Answer

Common-size financial statements use vertical analysis, which expresses each line item as a percentage of a base amount, usually total revenue or total assets. This provides a way to compare the relative importance of each line item over time or between companies. Ratio analysis involves calculating and comparing financial ratios, trend analysis looks at changes in financial data over time, and horizontal analysis compares financial data across different time periods.

Common-Size Financial Statements Represent a Form Of