Which of the following is a benefit of a common-size income statement?
A) It is very useful to assess how effectively a firm collected its accounts receivable.
B) It reveals a great deal of information about the adequacy of a firm's net working capital.
C) It can tell the analyst a great deal about a firm's efficiency and profitability.
D) It reveals how effectively a firm has increased its assets.

Question

Quizplus · Accepted Answer

A common-size income statement expresses each line item as a percentage of the firm's total revenue. Therefore, it allows an analyst to see the relative importance of each expense item and profitability ratios. This information can help an analyst assess a firm's efficiency and profitability.

Which of the Following Is a Benefit of a Common-Size