Asked by Frasier Williamson on Jun 03, 2024
Verified
Common size balance sheets make it easier to compare firms
A) with different degrees of leverage.
B) of different sizes.
C) in different industries.
D) that use different inventory valuation methods (FIFO vs. LIFO) .
Common Size Balance Sheets
Balance sheets expressed as percentages, allowing for easier comparison across companies or periods by standardizing financial statements.
FIFO vs. LIFO
Accounting methods for valuing inventory; First In, First Out (FIFO) and Last In, First Out (LIFO) affect the cost of goods sold and inventory valuation.
- Strengthen the efficacy of contrasting enterprises of diverse magnitudes by employing common size financial statements.
Verified Answer
UW
Unique WalkerJun 09, 2024
Final Answer :
B
Explanation :
Common size balance sheets express each item as a percentage of a base figure (e.g., total assets), making it easier to compare firms of different sizes by standardizing the numbers. This method helps in analyzing and comparing the financial position and performance of companies regardless of their size.
Learning Objectives
- Strengthen the efficacy of contrasting enterprises of diverse magnitudes by employing common size financial statements.
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