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CS Executive · Corporate Accounting and Financial Management · Financial Statement Analysis

In a common size income statement, which figure is normally taken as the base (100%) for expressing every other item?

Revenue from operations, that is net sales, is taken as 100% in a common size income statement. Every expense and profit item is then shown as a percentage of it, which makes firms of different sizes and different years comparable.

  1. ANet profit after tax
  2. BRevenue from operations (net sales)Correct
  3. CTotal expenses
  4. DGross profit

Explanation

A common size income statement expresses each item as a percentage of revenue from operations. Net profit or gross profit would be a base for only particular ratios, not for the whole statement, and total expenses is not the standard base.

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