Common-size
from class: Principles of Finance Definition Common-size analysis involves expressing financial statement items as a percentage of a base amount. It allows for easy comparison across periods and between companies of different sizes.
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Predict what's on your test 5 Must Know Facts For Your Next Test Common-size income statements express each item as a percentage of total sales. Common-size balance sheets express each item as a percentage of total assets. It helps in identifying trends and making cross-sectional comparisons. Common-size analysis is useful for benchmarking against industry standards. It simplifies financial data, making it easier to understand and interpret. Review Questions What does common-size analysis help you identify? In a common-size income statement, how is each line item expressed? Why is common-size analysis useful when comparing companies?
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