Question

A common size income statement:_______.

a. comparisons between years more difficult.
b. expresses items as a percentage of net sales.
c. uses the same dollar amount of net sales for each year.
d. is useful in estimating the impact of inflation.

Answer 1

The correct answer is letter "B": expresses items as a percentage of net sales.

Step-by-step explanation:

A Common Size Income Statement reflects a percentage of net sales for each account. Common size income statements are basic tools that a business owner may use to compare the performance of his company to rivals or to compare the company to industry averages. Each line in this type of income statement is displayed as a percentage of revenue or sales and the amounts are compared to past performances which allow to observe the different values easily.