12.4 Compare one company to another using common-size financial statements and benchmarking
1) Common-size statements are useful when comparing a company's performance against that of a similar, but not necessarily the same-sized, company.
2) By using only percentages in common-size statements, the statements emphasize dollar value bias.
3) If a person compares the net sales of two companies as absolutes, and ignores the relative percentages, we can infer that this comparison contains dollar value bias.
4) Common-size statements should NOT be used to compare a company's performance against the industry average.
5) A common-size comparative statement shows:
A) dollars and percents.
B) dollars only.
C) percents only.
D) dollar increases and decreases.
E) dollar decreases and increases.
6) In a common-size income statement, selling expenses are 55%. This means that they are 55% of:
A) net income.
B) net sales.
C) gross profit.
D) net profit.
E) total expenses.
7) Sobey's would probably benchmark with other:
A) general merchandise retailers.
B) big box retailers.
C) grocery chains.
D) companies that sell food.
E) companies that produce food.
8) A useful tool to compare the performance of similar companies is to do a __________ analysis on each one.
9) Comparing your company with a leading company in the same category of business is called __________.
10) Common-size statements use the same percentages that are computed during a __________ analysis, but no dollar amounts are shown.