Common-Size Financial Statements

question 78

Multiple Choice

Common-size financial statements:

• A) are a specialized application of ratio analysis.
• B) allow us to make meaningful comparisons between the financial statements of two firms that are different in size.
• C) are prepared by having each financial statement item expressed as a percentage of some base number, such as total assets or total revenues.
• D) All of the above are true.

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Definitions:

Insignificant Variance

A financial term referring to small differences between expected and actual figures that are not considered material for decision-making purposes.

Cause

A reason for an action or condition, or something that brings about an effect or result.

Variance

The difference between planned, budgeted, or standard costs and actual costs, often analyzed to control spending and improve financial management.

Time And Motion Studies

A business efficiency technique combining time study and motion study to standardize work processes and improve productivity.