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

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Multiple Choice

Common-size financial statements present all balance sheet account values as a percentage of:

Total liabilities

Total assets

Total revenues

Net income

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Verified step by step guidance

Understand the concept of common-size financial statements: These are financial statements where each line item is expressed as a percentage of a common base figure, making it easier to compare across companies or periods.

Identify the type of financial statement in question: In this case, the problem refers to the balance sheet, which lists assets, liabilities, and equity.

Determine the base figure for the balance sheet: Common-size balance sheets express all account values as a percentage of total assets. This is because total assets represent the sum of all resources controlled by the company, making it the logical base for comparison.

Clarify why total assets are used: Total assets provide a comprehensive view of the company's financial position, and expressing other items as a percentage of total assets allows for proportional analysis of liabilities and equity relative to the company's resources.

Review the incorrect options: Total liabilities, total revenues, and net income are not used as the base for common-size balance sheets. Total liabilities are part of the balance sheet but not the base figure, while total revenues and net income are relevant to the income statement, not the balance sheet.