Question

Which of the following ratios appears on a common-size balance sheet? I. Debt to asset ratio II. Net working capital to total assets III. Net profit margin

Answer 1

The answer is I, II

Step-by-step explanation:

Common-size ratio is a way of expressing each line item of a financial statement as a percentage of a selected line item.

For income statement, each line item is expressed as a percentage of net sales or revenue.

For balance sheet, each line item is expressed as a percentage of total assets.

Both I and II are correct because they are expressed as a percentage of total assets and it is a balance sheet

III is wrong because net profit margin is expressed as a percentage of sales