Common-size financial statements:
A) are a specialised application of ratio analysis.
B) allow us to make meaningful comparisons between the financial statements of two companies that are different in size.
C) are prepared by having each financial statement item expressed as a percentage of some base number, such as total assets or total revenues.
D) All of the above are true.

Question

Quizplus · Accepted Answer

A) Common-size financial statements are a specialized application of ratio analysis.
B) Common-size financial statements allow us to make meaningful comparisons between the financial statements of two companies that are different in size.
C) Common-size financial statements are prepared by having each financial statement item expressed as a percentage of some base number, such as total assets or total revenues. Therefore, all of the above statements are true.

Common-Size Financial Statements