Convert income statement to common-size income statement

Common-size income statements (45)

  • Express each category of income statement as a percentage of revenue
  • Allow for comparing income statement elements over time and across firms
  • Examine firm’s strategy 
  • Expressing expenses as a percentage of revenue is appropriate except income tax expense
  • Effective tax rate (46)
    • Express tax expense as a percentage of pretax income
  • South is less profitable in quantity but more profitable on a relative basis.