Common Size Financial Statements Make It Easier to Compare Firms

question 36

Multiple Choice

Common size financial statements make it easier to compare firms ____________.

• A)of different sizes
• B)in different industries
• C)with different degree of leverage
• D)that use different inventory valuation methods (FIFO vs.LIFO)
• E)none of the above

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Definitions:

Labor

The employment of human physical and psychological skills in the production process of goods and services.

Capital

Financial assets or the financial value of assets, such as cash and securities, or fixed assets like buildings and machinery, that are used in producing goods or services.

Short-Run

A period of time during which at least one of a firm's inputs is fixed.

Machines

Devices or systems of devices that perform tasks or assist in the performance of tasks, often using mechanical, electrical, or computer-driven components.