Asked by Akarshna Premanand on May 26, 2024
Verified
One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to
A) judge the relative potential of two companies of similar size in different industries
B) determine which companies in a single industry are of the same value
C) determine which companies in a single industry are of the same size
D) make a better comparison of two companies of different sizes in the same industry
Common-sized Statement
A financial statement in which each line item is expressed as a percentage of a relevant total, which allows for easy comparison across time periods or companies.
Financial Analysis
The process of evaluating businesses, projects, budgets, and other finance-related entities to determine their performance and suitability.
Different Industries
Various sectors of the economy that produce or distribute goods and services, such as technology, healthcare, and manufacturing.
- Familiarize yourself with the concept and deployment of comparable financial statements.
Verified Answer
AN
Agathy Nguy?nMay 27, 2024
Final Answer :
D
Explanation :
A common-sized statement converts all line items to a percentage of a common base, such as net sales, which makes it easier to compare companies of different sizes within the same industry. This allows for a more accurate comparison of financial performances between companies with different scales of operations.
Learning Objectives
- Familiarize yourself with the concept and deployment of comparable financial statements.