A common-size income statementpermits an analysis of changes or differences in the relations between revenues, expenses, and net income and identifies relations that the analyst should explore further, such as
A)time series analysis.
B)economic analysis.
C)cross-section analysis.
D)both choices a and c.
E)both choices b and c.

Question

Quizplus · Accepted Answer

A common-size income statement allows for a comparison of different line items as a percentage of total revenue. This allows for a time series analysis, looking at changes in the ratios over time, and a cross-section analysis, comparing the ratios of different companies or industries. Therefore, the correct choice is D. Economic analysis (choice B) is not directly related to the use of a common-size income statement.

A Common-Size Income Statementpermits an Analysis of Changes or Differences