CMA Intermediate · Financial Management and Business Data Analytics · Comparative, Common-Size Financial Statements and Trend Analysis
In a common-size income statement of Kaveri Textiles Ltd., every line item is expressed as a percentage of which base figure?
The base is net sales or revenue from operations, taken as 100%. Every income statement item is shown as a percentage of sales, which lets analysts compare cost structures across years and across firms of different sizes. Total assets is the base used for the balance sheet.
- ANet profit after tax
- BTotal assets
- CNet sales (revenue from operations)Correct
- DTotal expenses
Explanation
A common-size income statement takes net sales or revenue from operations as 100% and shows each item as a percentage of it. Total assets is the base for the balance sheet, not the income statement. Net profit and total expenses are not the standard base.
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