All but One of the Following Is True of Common-Size

question 47

Multiple Choice

All but one of the following is true of common-size income statements.

• A) Each income statement item is standardized by dividing it by total assets.
• B) Income statement accounts are represented as percentages of sales.
• C) Each income statement item is standardized by dividing it by sales.
• D) Common-size financial statement analysis is a specialized application of ratio analysis.

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Definitions:

Financial Information

Data regarding the financial performance and condition of an entity, including income statements, balance sheets, and cash flows.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a certain period of time; it measures the efficiency of inventory management.

Financial Information

Data relating to the financial status or operations of a business, including balance sheets, income statements, and cash flow statements.

Times Interest Earned

A financial ratio that measures a company's ability to service its debt by comparing operating income to interest expense.