The principal reason for preparing common-size statements is [blank].
A)to make meaningful comparisons between firms that are not the same size
B)to make meaningful comparisons between different quarters within the fiscal year
C)to eliminate the effects of inflation
D)to make meaningful comparisons between firms in different industries

Question

Quizplus · Accepted Answer

Common-size statements convert financial statement items into percentages of a common base, usually total assets (for balance sheets) or total revenue (for income statements). This allows for meaningful comparisons between firms that may be of different sizes, making it easier to identify trends and differences in financial performance.

The Principal Reason for Preparing Common-Size Statements Is [Blank]