Refer back to Textbook Problem 17.5. Recast the financial statements for Green Valley into common size...

Refer back to Textbook Problem 17.5. Recast the financial statements for Green Valley into common size financial statements. Describe at least two advantages of a common size presentation of financial statements.

Solutions

Expert Solution

Two advantages of common size financial statement are as follows

(an) Easy to Understand:

Common-size Statement helps the clients of financial statement to clarify about the proportion or level of every individual thing to add up to assets/liabilities of a firm. For instance, if an investigator needs to know the working capital position he may find out the level of every individual part of current assets against add up to assets of a firm and furthermore the rate offer of every individual segment of current liabilities.

(b) Helpful for Time Series Analysis:

A Common-Size Statement causes an expert to discover a pattern identifying with rate offer of every benefit in complete assets and rate offer of every obligation in absolute liabilities.

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Hope that helps.

Feel free to comment if you need further assistance J

jeff jeffy answered 1 year ago

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