Which of the following is NOT true of common-size balance sheets?
A) Each asset and liability item on the balance sheet is standardized by dividing it by total assets.
B) Balance sheet accounts are represented as percentages of total assets.
C) Each asset and liability item on the balance sheet is standardized by dividing it by sales.
D) Common-size balance sheets allow us to make meaningful comparisons between the balance sheets of two firms that are different in size.

Question

Quizplus · Accepted Answer

Common-size balance sheets standardize each asset and liability item by dividing it by a common base, which is usually total assets. Therefore, option C, which suggests standardizing by sales, is not true.

Which of the Following Is NOT True of Common-Size Balance