What does a common size income statement allow you to compare?

A common size income statement is a financial tool that expresses each line item as a percentage of total revenue for that period. This method allows for easier comparison across different periods or between companies, regardless of their size. By relating all amounts within one year to the revenue of that same year, stakeholders can analyze the proportion of expenses, taxes, and net income in relation to total sales, providing insights into operational efficiency and profitability.

This approach is particularly useful when comparing financial performance across varying levels of revenue and can highlight trends in income and costs. For instance, if one company consistently has lower expenses as a percentage of revenue compared to another, it may indicate better operational management.

The other options provided do not reflect the primary function of a common size income statement as accurately. The focus is not on total liabilities, net income relative to total assets, or a comparison between current and noncurrent assets. Instead, the emphasis is on the relationship of all income statement components to revenue, which offers a comprehensive view of financial performance for a specific period and allows for meaningful comparisons.