One of the most important applications of ratio analysis is to compare a company's performance with that of other players in the industry or to

compare its own performance over a period of time. Such analyses are referred to as a comparative analysis and trend analysis, respectively.

A common size analysis requires the representation of financial statement data in terms of a single financial statement item $($or base account or

value$).$

What is the most commonly used base item for a common size incorile statement?

Total liabilities

Net sales

Total assets

Stockholders' equity

Suppose you are conducting an analysis of the financial performance of Green Caterpillar Garden Supplies Inc. over the past three years.

The company did not issue new shares during these three years and has faced some operational difficulties. The company has thus pilot tested some

new forecasting strategies for better operations management. You have collected the company's relevant financial data, made reasonable assumptions

based on the information available, and calculated the following ratios.