A common size income statement would typically be prepared by dividing:
A) all items on income statement in Year t by their corresponding value in Year t-1.
B) all items on income statement in Year t by their corresponding balance sheet accounts in Year t.
C) all items on income statement in Year t by net income in Year t-1.
D) all items on income statement in Year t by sales in Year t.

Question

Quizplus · Accepted Answer

A common size income statement is prepared by dividing all items on the income statement in Year t by their corresponding sales in Year t. This allows for a comparison of the relative proportions of each expense or revenue item to overall sales, making it easier to identify trends and areas for improvement.

A Common Size Income Statement Would Typically Be Prepared by Dividing