Which of the following is most helpful in comparing companies of different sizes?
A) Ratio analysis is helpful in comparing companies of different sizes.
B) Common-size statements are helpful in comparing companies of different sizes.
C) Both ratio analysis and common size statements are helpful in comparing companies of different sizes.
D) Neither ratio analysis nor common size statements are helpful in comparing companies of different sizes

Question

Quizplus · Accepted Answer

Both ratio analysis and common-size statements are tools that normalize financial information, making it possible to compare companies of different sizes by expressing items in relative terms rather than absolute numbers. Ratio analysis does this by relating one financial figure to another, while common-size statements convert financial statement numbers to percentages of a base number, facilitating comparison.

Which of the Following Is Most Helpful in Comparing Companies