A Common Size Income Statement

question 13

Multiple Choice

A common size income statement:

• A) uses the same dollar amount of revenues for each year.
• B) expresses items as a percentage of revenues.
• C) makes comparisons between years more difficult.
• D)is useful in estimating the impact of inflation.

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Definitions:

Price Floor

A government-set minimum price at which a product can be sold, aimed to prevent the price from falling too low.

Shortage

A market condition where the quantity demanded of a good exceeds the quantity supplied at the current price, leading to upward pressure on price.

Surplus

The situation in which the quantity of goods produced exceeds the quantity of goods demanded. Surpluses can result in price drops for products or services, reflecting a mismatch in supply and demand.

Price Ceiling

A cap set by authorities on the maximum price for a good or service, aimed at safeguarding consumers.