Hi! I can't figure out this question...any help is greatly appreciated!

In a common size financial statement, which of the following is given a percentage of 100 percent?

a. total liabilities
b. total assets
c. net income
d. cost of goods sold

I was thinking net income, but I really don't know.

Thank you!

I looked at several, cost of goods sold was given as a percentage of sales.

To determine which item in a common size financial statement is given a percentage of 100 percent, we need to understand what a common size financial statement is. A common size financial statement is a type of financial statement where each line item is expressed as a percentage of a base amount.

In this case, the base amount is typically the total assets or total liabilities. All other line items are calculated as a percentage of this base amount.

The percentage is calculated by dividing each line item by the base amount and multiplying by 100. This allows for easy comparison between different line items.

Now, let's consider the options given:

a. Total liabilities: If total liabilities are given a percentage of 100 percent, it means that all other line items are expressed as a percentage of the total liabilities. This is an unusual scenario, as typically the base amount in a common size financial statement is the total assets. So, it is unlikely that total liabilities would be given a percentage of 100 percent in a common size financial statement.

b. Total assets: If total assets are given a percentage of 100 percent, it means that all other line items are expressed as a percentage of the total assets. This is a common scenario and often the base amount in a common size financial statement. Therefore, it is a likely possibility.

c. Net income: Net income represents the profit or loss of a company. It is not usually given a percentage of 100 percent in a common size financial statement, as it is an absolute value and not typically compared to the total assets or total liabilities.

d. Cost of goods sold: The cost of goods sold represents the direct costs associated with producing or acquiring the goods sold by a company. Similar to net income, it is not usually given a percentage of 100 percent in a common size financial statement.

Based on the explanation above, the most likely answer is b. Total assets. In a common size financial statement, the total assets are typically given a percentage of 100 percent, and all other line items are calculated as a percentage of the total assets.