The common size income statement: facilitates comparisons by stating every line
ID: 2812359 • Letter: T
Question
The common size income statement:
facilitates comparisons by stating every line item as a percent of revenue.
eliminates the need to evaluate the firm by its dollar performance by showing how each component of the income statement stands as a percentage of assets.
shows the interaction of the income statement and balance sheet.
All of the above
facilitates comparisons by stating every line item as a percent of revenue.
eliminates the need to evaluate the firm by its dollar performance by showing how each component of the income statement stands as a percentage of assets.
shows the interaction of the income statement and balance sheet.
All of the above
Explanation / Answer
The common size income statement:
CORRECT ANSWER : facilitates comparisons by stating every line item as a percent of revenue.
In common size income statement, we take revenue as 100% and then divide all items of income statement by sales and arrive at respective %.
so in commonsize income statement, our purpose is to know what component is what % of sales, so that we can compare with firm's earlier data or with competitor to make decisions (THUMBS UP PLEASE)