Analyzing Common-Size Income Statement of Company XYZ

Easy Analysis Techniques Common-size Statements

Common-size statements are a useful analytical tool for comparing financial performance across different companies or periods, as they express each line item as a percentage of a base figure.

Consider the following common-size income statement for Company XYZ:

Revenue: 100%
Cost of Goods Sold: 60%
Gross Profit: 40%
Operating Expenses: 25%
Net Income: 15%

Based on this information, which of the following statements is true regarding Company XYZ's financial performance?

Company XYZ has a higher proportion of expenses compared to its gross profit.

Company XYZ has a net income margin of 25%.

Company XYZ's operating efficiency is reflected by its gross profit margin of 40%.

Hint

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