Study Unit 1.1: Common Size Financial Statements Flashcards
Purpose of Common-Size financial Statements
Common-size financial statements restate financial statement line items in terms of percentages of a given amount so that the financial statements of steadily growing firms and firms of different sizes can be Common-size financial statements restate financial statement line items in terms of percentages of a given amount so that the financial statements of steadily growing firms and firms of different sizes can be analyzed and compared. analyzed and compared.
Define Capital Structure
A firm’s capital structure includes its sources of financing, both long- and short-term. The sources of financing may be either in the form of debt (external financing) or equity (internal financing).
Define operating leverage.
Leverage is the relative amount of fixed cost in a firm’s overall cost structure.