Common-size presentation
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What is meant by "presentation of financial statement information in common-size amounts rather than dollar amounts?" Why is this type of presentation sometimes more meaningful than use of actual dollar amounts?
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The Solution explains what common-size presentation is and its use in showing business data.
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In the common-size presentation of financial statements, the income statement figures are presented as a percentage of sales and the balance sheet figures are presented as a percentage of total assets. The common-size presentation of financial statements is also known as vertical analysis.
Vertical analysis (the common-size statements) involves preparation of common-size financial statements and all amounts for a given year are converted into percentages of a key financial statement ...
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