If a firm's common size income statement shows that the earnings after tax percentage is too low, the firm may have spent too much money:
A)on total assets as a percentage of long-term liabilities.
B)on expenses as a percentage of current assets.
C)on cost of goods sold as a percentage of sales.
D)on taxes paid as a percentage of stockholders' equity.

Question

Quizplus · Accepted Answer

If a firm's common size income statement shows that the earnings after tax percentage is too low, it may be due to high cost of goods sold as a percentage of sales. This means the firm is spending too much money on production or purchasing goods, reducing their earnings.

If a Firm's Common Size Income Statement Shows That the Earnings