Common-size financial statements
A) allow for an easy comparison of balance sheets and income statements across firms in the industry.
B) provide quantitative clues about the direction that the firm is moving.
C) are obtained by dividing all income statement accounts by net sales and all balance sheet accounts by total assets.
D) All of these choices are correct

Question

Quizplus · Accepted Answer

Common-size financial statements are designed to allow for easy comparison across firms by standardizing the presentation of financial data, provide insights into the firm's strategic direction by highlighting relative changes in financial statement items, and are indeed created by standardizing income statement accounts by net sales and balance sheet accounts by total assets.

Common-Size Financial Statements