When Using Common- Size Financial Statement to Evaluate the Operating

question 52

Multiple Choice

When using common- size financial statement to evaluate the operating results of two different companies, the gross margin of Company A is expressed as a percentage of:

• A)a common standard for both Company A and Company B.
• B)the total gross margins of Companies A and B.
• C)Company B's gross margin.
• D)Company A's sales.

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Definitions:

Ratification

The adoption or affirmance by a person of a prior act that did not bind him.

Mutual Mistake

A misunderstanding between all parties of a contract regarding the basic facts or terms of the contract, which can make the agreement voidable.

Unilateral Mistake

A misunderstanding or error made by one party in a contract, which may not necessarily void the contract.

Misrepresentation

The assertion of a fact that is not in accord with the truth. A contract can be rescinded on the ground of misrepresentation when the assertion relates to a material fact or is made fraudulently and the other party actually and justifiably relies on the assertion.