NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Financial Analysis
In a common-size income statement, each line item is normally expressed as a percentage of which figure?
In a common-size income statement every line item is expressed as a percentage of revenue from operations, or net sales. This makes cost structures and margins comparable across years and companies of different sizes. Total assets is the base for the balance sheet instead.
- ANet profit after tax
- BTotal revenue from operations (net sales)Correct
- CTotal assets
- DShareholders' equity
Explanation
A common-size income statement scales every item to revenue (net sales) as 100%. This lets an analyst compare cost structures across years and across companies of different sizes. Total assets is the base used for a common-size balance sheet, not for the income statement.
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