What is the best way to study the relationship of the components of financial statements?
A)Perform ratio analysis.
B)Perform trend analysis.
C)Perform horizontal analysis.
D)Prepare common-size statements.

Question

Quizplus · Accepted Answer

The best way to study the relationship of the components of financial statements is to prepare common-size statements. These statements allow for the comparison of one company's financial statements to another and allow for easy analysis of trends and relationships between different components of the financial statements. Ratio analysis, trend analysis, and horizontal analysis can also be useful tools, but they are most effective when used in conjunction with common-size statements.

What Is the Best Way to Study the Relationship of the Components