Question: A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do? Determine which companies

A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do?

  • Determine which companies in the same industry are at approximately the same stage of development.
  • Compare the mix of revenue, and expenses, and determine efficient use of resources within a company over time or between companies within a given industry without respect to relative size.
  • Evaluate financial statements of companies within a given industry of approximately the same value.
  • Ascertain the relative potential of companies of similar size in different industries.

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