The common-size percent is computed by:
A) Dividing the analysis amount by the base amount.
B) Subtracting the base amount from the analysis amount and multiplying the result by 100.
C) Dividing the base amount by the analysis amount.
D) Dividing the base amount by the analysis amount and multiplying the result by 1,000.
E) Dividing the analysis amount by the base amount and multiplying the result by 100.

Question

Quizplus · Accepted Answer

The common-size percent is computed by dividing the analysis amount (such as an individual line item on a financial statement) by the base amount (such as total assets or total revenue), and multiplying the result by 100 to express it as a percentage. This allows for easier comparison of different line items, as the percentage shows their relative size and importance within the base amount. Choice E correctly states this calculation method.

The Common-Size Percent Is Computed By