NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Financial Analysis
In a common-size income statement, each line item is usually expressed as a percentage of which base figure?
The base is net sales, also called revenue from operations. Every expense and profit line is shown as a percentage of sales, which lets an analyst compare cost structures and margins across periods and companies of different sizes.
- ANet profit after tax
- BTotal assets
- CNet sales (revenue from operations)Correct
- DShareholders' equity
Explanation
A common-size income statement scales every item against net sales, so cost lines and margins can be compared across years and across firms of different sizes. Total assets is the base for a common-size balance sheet, not the income statement. Net profit and equity are not used as the standard base.
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