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.

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Definitions:

Company Tax Rate

The rate at which a corporation's income is taxed by the government.

Current Tax Liability

The amount of income taxes a company is obligated to pay to governmental authorities within the next fiscal period.

Tax Deductible

Tax deductible refers to certain expenses or investments that can be subtracted from gross income to reduce the amount of income subject to tax.

Depreciation

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value due to use and wear and tear.