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What is a comon-size income statement? What three ratios of profitability are found on this statement?...

What is a comon-size income statement? What three ratios of profitability are found on this statement? How is the statement used?
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Answer #1

What is a comon-size income statement?

Income statement where each account/line item is expressed as % of sales.

What three ratios of profitability are found on this statement?

Gross Profit Margin

Operating Profit Margin

Net Profit Margin

How is the statement used?

One can easily see how much of every dolalr earned goes to various expenses(proportion of revenues spent on advertising, research & development,etc.) and allows comparison with same company across different periods of time and other companies or competitors of different sizes & not be "blinded" by size differences inherent in raw data.

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