Using Common-Size Balance Sheet Percentages to Project Individual Assets, Liabilities

question 24

Multiple Choice

Using common-size balance sheet percentages to project individual assets, liabilities, or shareholders' equity has all of the following shortcomings except :

• A) Individual assets, liabilities, and shareholders' equity are not independent of each other.
• B) If a company experiences changing proportions for investments in securities among its assets, other asset categories may show decreasing percentages in some years even though their dollar amounts are increasing.
• C) Individual assets, liabilities, and shareholders' equity are independent of each other.
• D) The common-size percentages do not permit the analyst to easily change the assumptions about the future behavior of an individual asset or liability.

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