Which type of income statement expresses a firm's expenses and profits as a percentage of its sales?

A common-sized income statement is designed to present each line item as a percentage of total sales or revenues. This format enables analysts and stakeholders to evaluate the relative size of expenses and profits compared to sales, making it easier to compare performance across different companies or time periods, regardless of their size. This approach provides insights into how much of each dollar of sales is consumed by various expenses, such as cost of goods sold, operating expenses, and tax obligations.

For instance, if a company generates $1,000,000 in sales and has $600,000 in costs of goods sold, the cost of goods sold would be presented as 60% of sales on the common-sized income statement. This allows for a clear comparison of the cost structure between firms and aids in identifying trends in profitability and operational efficiency.

In contrast, the operating income statement emphasizes operational performance without standardizing expenses against sales. The gross profit margin statement focuses specifically on the relationship between sales and gross profit, while the net income statement provides an absolute measure of profitability without relating it to sales figures. These other types of income statements do not provide the same level of comparability and analytical insight that a common-sized income statement offers.