Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Common-sized Statements

Financial Accounting

14. Financial Statement Analysis

Common-sized Statements

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

In a common-size income statement, each item is expressed as a percentage of total:

sales (revenue)

liabilities

assets

equity

Previous problemNext problem

Verified step by step guidance

Understand the concept of a common-size income statement: It is a financial statement where each line item is expressed as a percentage of a base figure, typically to facilitate comparison across companies or periods.

Identify the base figure for a common-size income statement: In this case, the base figure is total sales (revenue), as the income statement primarily focuses on the company's performance in generating revenue and managing expenses.

Recognize why sales (revenue) is used as the base: Sales represent the total inflow of economic benefits from the company's operations, making it the logical denominator for expressing other items like cost of goods sold, operating expenses, and net income as percentages.

Understand the calculation process: To express each item as a percentage of total sales, divide the specific line item by total sales and multiply by 100. For example, \( \text{Percentage} = \frac{\text{Line Item}}{\text{Total Sales}} \times 100 \).

Apply this concept to all items in the income statement: Each item, such as cost of goods sold, operating expenses, and net income, is calculated as a percentage of total sales to create the common-size income statement.