Understanding Common-Size Statements

Common-size financial statements are a useful tool for analyzing a company's financial performance by expressing each line item as a percentage of a base figure. These statements facilitate comparisons across periods and with other companies, regardless of size.

In a common-size income statement, revenues are typically used as the base figure. This allows stakeholders to easily evaluate how expenses, taxes, and net income relate to total revenues.

Which of the following statements about common-size statements is true?