Which of the Following Is Not True About Common Size

question 78

Multiple Choice

Which of the following is not true about common size financial statements?

• A) Such statements are used to uncover data irregularities.
• B) Such statements are constructed by calculating the percentage each line item of the income statement, balance sheet, and cash flow statement is of annual sales.
• C) Such statements are useful for comparing businesses of different sizes in the same industry at different moments in time.
• D) Common size statements applied over a number of consecutive periods may be used to determine if the target firm is deferring necessary spending.
• E) Common size statements may be calculated for both quarterly and annual financial data.

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Definitions:

Consistent

A property of a set of statements that allows them all to be true at the same time without contradiction.

Contingency

A forthcoming incident or situation which may occur but its certainty cannot be ascertained.

Conditional Statement

A statement in logic that involves an if-then structure, asserting that if one thing is true, then another will follow.

Contradictory

Describing propositions, beliefs, or statements that are mutually opposed or inconsistent, such that if one is true, the other must be false.