In comparing companies of different sizes, which of the following is most helpful?

Question

Quizplus · Accepted Answer

Both ratio analysis and using common-sized statements are helpful in comparing companies of different sizes. Ratio analysis allows for the comparison of important financial metrics, such as liquidity and profitability, while common-sized statements standardize the financial statements of companies of different sizes by expressing each line item as a percentage of a common base, typically total revenue. Both methods provide a way to make meaningful comparisons between companies of different sizes.

In Comparing Companies of Different Sizes, Which of the Following