The principal reason for preparing common size statements is
A)to make meaningful comparisons between firms that are not the same size.
B)to make meaningful comparisons between different fiscal years.
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 data into percentages, making it easier to compare firms of different sizes. By making all items on the income statement or balance sheet a percentage of a common base (such as total revenues or assets), we can make more meaningful comparisons between companies that vary in size.

The Principal Reason for Preparing Common Size Statements Is