Question

An analyst wants to compare one firm’s level of costs of goods sold and operating expenses last year to a competitor firm’s level of costs of goods sold and operating expenses last year. Which one of the following financial statements provided for both firms would best help achieve this objective?

Group of answer choices

A. Common size income statement

B. Common size balance sheet

C. Pro forma income statement

D. Pro forma balance sheet

Answer 1

Ans- Option A. Common size income statement

Cost of Goods sold and Operating expenses are part of Income statement in a financial statment.

While Common size income statement is best as it provides analysis and comparison of company's performance over past period. In Common size income statement, items of income statemnet are presented as percentage based on the value of sales.

Thus, for analyst who wants to compare one firm’s level of costs of goods sold and operating expenses last year to a competitor firm’s level of costs of goods sold and operating expenses last year Common size Income statment would be the best suited one.