Question #17
Reading: Reading 13 Integration of Financial Statement Analysis Techniques
PDF File: Reading 13 Integration of Financial Statement Analysis Techniques.pdf
Page: 8
Status: Incorrect
Correct Answer: B
Your Answer: B
Question
In order to compare companies using a common size statement, the various line items in a company's income statement are most likely to be divided by the company's:
Answer Choices:
A. net earnings
B. revenues
C. total assets
Explanation
In a common size income statement, all the line items in a company's income statement
are divided by the company's revenues. Common size statements make comparability
across companies much easier. An analyst might use a common size statement to
compare trends in income statement variables (such as gross margins) for a group of
companies.