The Principal Reason for Preparing Common Size Statements Is

question 31

Multiple Choice

The principal reason for preparing common size statements is

• A)to make meaningful comparisons between firms that are not the same size.
• B)to make meaningful comparisons between different fiscal years.
• C)to eliminate the effects of inflation.
• D)to make meaningful comparisons between firms in different industries.

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Definitions:

Voting Shares

Shares that grant the holder the right to vote on company matters, typically at shareholder meetings.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee but not control them.

Significant Influence

A level of control or impact an investor has over an investee, typically indicated by ownership of 20% to 50% of voting shares, allowing influence over business decisions without full control.

Intercompany Transactions

Financial transactions occurring between two divisions or subsidiaries within the same parent company.