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

A common-size balance sheet helps financial managers determine:

the company's net income for the period

the market value of the company's assets

the exact dollar value of each account over multiple years

the relative proportion of each asset, liability, and equity item as a percentage of total assets

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Verified step by step guidance

Understand the concept of a common-size balance sheet: A common-size balance sheet expresses each item as a percentage of total assets, allowing for easy comparison of financial statements across different periods or companies.

Recognize the purpose: The goal is to analyze the relative proportions of assets, liabilities, and equity rather than focusing on absolute dollar amounts.

Identify the calculation method: For each item on the balance sheet, divide the dollar value of the item by the total assets and multiply by 100 to express it as a percentage. For example, \( \text{Percentage} = \frac{\text{Item Value}}{\text{Total Assets}} \times 100 \).

Interpret the results: The percentages provide insights into the financial structure of the company, such as how much of the company's assets are financed by liabilities versus equity.

Apply the analysis: Use the common-size balance sheet to compare the company's financial structure over multiple years or against other companies, focusing on trends and proportions rather than exact dollar values.