One Reason That a Common-Size Statement Is a Useful Tool

question 114

Multiple Choice

One reason that a common-size statement is a useful tool in financial performance evaluation is that it enables the user to

• A)make better comparisons of two companies of different sizes in the same industry.
• B)determine which companies in a single industry are of the same size.
• C)judge the relative potential of two companies of similar size in different industries.
• D)determine which companies in a single industry are of the same value.

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Definitions:

Elasticity of Demand

A measure of how much the quantity demanded of a good or service changes in response to a change in its price.

Determinant

A factor or element that causes change in an outcome or condition, often used in reference to variables that affect economic indicators.

Cross Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good.

Perfectly Inelastic

A situation in demand or supply in which the quantity demanded or supplied does not change regardless of changes in price.