Which of the following statements is/are accurate regarding the common-size analysis of financial statements? I. A vertical common-size balance sheet presents all the line items as a percentage of total assets. II. A vertical common-size income statement presents all the line items as a percentage of net income. III. A horizontal common-size income statement calculates all line items as a percentage of the base year's income statement. A. II only B. II & III C. I & III

The correct answer is C. Statement II is incorrect. A vertical common-size income statement presents all the line items as a percentage of REVENUE.Statements I is correct. A vertical common-size balance sheet presents all the line items as a percentage of total assets. Statement III is correct. A horizontal common-size income statement calculates all line items as a percentage of the base year's income statement.

CFA Level 1 Question Of The Week - Financial Reporting And Analysis (7) - CFA Level 1

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- Matt_AnalystPrep
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  15 Jul 2019 at 1:32 pm
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  The correct answer is C.
  
  Statement II is incorrect. A vertical common-size income statement presents all the line items as a percentage of REVENUE.
  
  Statements I is correct. A vertical common-size balance sheet presents all the line items as a percentage of total assets.
  
  Statement III is correct. A horizontal common-size income statement calculates all line items as a percentage of the base year’s income statement.
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