Why is the common-size income statement valuable to the analyst?
A) The common-size income statement shows the relative magnitude of revenues and expenses to total assets.
B) The common-size income statement allows the analyst to compare the firm to itself from year-to-year, but not to its competitors.
C) The common-size income statement shows the relative magnitude of revenues and expenses relative to profits.
D) The common-size income statement shows the relative magnitude of expenses relative to net sales.

Question

Quizplus · Accepted Answer

The common-size income statement shows the relative magnitude of expenses relative to net sales, which is valuable to the analyst in understanding the company's cost structure and identifying areas for potential cost savings or efficiency improvements.

Why Is the Common-Size Income Statement Valuable to the Analyst