CFA Level I · CFA Level I Exam · Financial Analysis Techniques
An analyst prepares a vertical common-size income statement for a company. Each line item is most likely expressed as a percentage of:
A vertical common-size income statement expresses each line item as a percentage of revenue. Revenue is set to 100%, so cost of sales, expenses and profit are shown as shares of sales. Total assets is the base for the balance sheet, not the income statement.
- Anet income.
- Brevenue.Correct
- Ctotal assets.
Explanation
A vertical common-size income statement divides every line item by revenue (sales), so the top line equals 100%. Net income is only one line on the statement, and total assets is the base used for the balance sheet, not the income statement.
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