Comparing Firms Using a Common-Size Balance Sheet Rests on the Assumption

question 26

Multiple Choice

Comparing firms using a common-size balance sheet rests on the assumption that

• A)the size or scale of a business does not affect the relation between a given balance sheet item and total assets.
• B)the size or scale of a business does affect the relation between a given balance sheet item and total assets.
• C)the large purchaser can negotiate better terms, including lower per-unit prices.
• D)more negotiating power would appear on the large purchaser's balance sheet as proportionately smaller amounts reported for inventory relative to the amounts reported by a smaller purchaser with less negotiating power.
• E)more negotiating power would appear on the large purchaser's balance sheet as proportionately larger amounts reported for accounts payable relative to the amounts reported by a smaller purchaser with less negotiating power.

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Definitions:

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