Question

Oil creek auto has sales of $3,740, net income of $274, net fixed assets of $2,800, and current assets of $920. the firm has $630 in inventory. what is the common-size statement value of inventory?

Answer 1

An income statement that expresses each line item as a percentage of a base amount is known as a common-size income statement

What is common-size statement?

An income statement that expresses each line item as a percentage of a base amount is known as a common-size income statement. Typically, this refers to overall earnings or total sales. Financial ratio analysis's objective is comparable to that of a common-size income statement. Items are shown as a percentage of a common base amount, such as total sales revenue, in a financial statement of common size. This kind of financial statement makes it simple to compare one company to another or different time periods within the same company.

The common-size statement refers to expressing each value as a percent of sales:

Sales                 3,340                   100.000%

income                 274                     8.234% (274 divided by 3340 times 100)

fixed assets          2,699               80.809%

current assets         836                25.030%

Inventory               417                0.12485  (417/3,340)

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