The statement that common size income statements show balance sheet items as a percentage of current assets is false. Here is why:

• Common size income statements express each line item as a percentage of total sales or revenues, not as a percentage of current assets or any balance sheet figure

• Common size balance sheets, on the other hand, express each line item as a percentage of total assets. This means all assets, including current and non-current assets, are the base figure for the percentages

• For example, in a common size balance sheet, current assets might be shown as a certain percentage of total assets, and individual items within current assets (like cash or inventory) are also expressed as a percentage of total assets

• This method allows analysts to understand the relative size of each balance sheet item compared to the company's total asset base, facilitating comparisons across companies or time periods

In summary, common size income statements relate items to sales revenue, while common size balance sheets relate items to total assets. They do not show balance sheet items as a percentage of current assets