Which activity is described as part of a common financial analysis process?

• A. Spread statements with common size assets, liabilities and expenses
• B. Finalise tax returns
• C. Prepare a marketing plan
• D. Conduct a risk assessment

Answer: (A)

Common-size analysis Expresses each line item as a percentage of a base amount, such as total assets for the balance sheet or total revenue for the income statement. Spreading statements into these percentages is the practical step that makes this analysis possible because it standardizes different-sized figures, letting you compare composition and trends across periods or with other firms regardless of size. This is why the activity described—converting the financial statements into common-size percentages for assets, liabilities, and expenses—is the best fit for a common financial analysis process. The other tasks—finalising tax returns, preparing a marketing plan, and conducting a risk assessment—are important, but they belong to tax compliance, marketing strategy, and risk management, not to the process of creating common-size financial statements.