Question

Common-size statements: a. Reveal changes in the relative importance of each financial statement item to a base amount. b. Do not emphasize the relative importance of each item. Compare financial statements over time. c. Show the dollar amount of change for financial statement items. d. Reveal patterns in data across successive periods.

Answer 1

a. Reveal changes in the relative importance of each financial statement item to a base amount.

Step-by-step explanation:

Common size statement analysis is a ratio analysis of financial statements. It shows a standard base figure relative to its all items as a percentage. For example, in an income statement, service, or revenue is the base figure, so we have used like 100%. Then we go one by one and check those items relative importance to that sales or revenues. Therefore, option "A" is the correct answer.