Common size financial statements make it easier to compare firms __________.
A) of different sizes
B) in different industries
C) with different degree of leverage
D) that use different inventory valuation methods (FIFO vs.LIFO)
E) None of these is correct.

Question

Quizplus · Accepted Answer

Common size financial statements express all items as a percentage of a common base, such as total assets or total revenue. This allows for easier comparisons between firms of different sizes, as each item is standardized to the same base.

Common Size Financial Statements Make It Easier to Compare Firms