In Common-Size Financial Statements

question 1

Multiple Choice

In common-size financial statements,

• A) all balance sheet items are divided by total liabilities.
• B) total sales are divided by total assets.
• C) depreciation expense is divided by total sales.
• D) accrued taxes are divided by total sales.
• E) net income is divided by total assets.

---

Definitions:

Break-even Point

The level of production or sales at which costs equal revenues, and there is no profit or loss.

Break-even Point

The point at which total costs equal total revenues, meaning no profit or loss is being made.

Contribution Margin Ratio

A financial metric that shows what percentage of sales revenue is available to cover fixed costs and generate profit.

Variable Costs

Costs that change in proportion to the level of activity or volume of production, such as raw materials and labor expenses.