What are common-size financial statements primarily used for?

Common-size financial statements are primarily used to facilitate comparisons of financial data across different time periods and between various companies, regardless of their size. By expressing all items as a percentage of a common figure—such as total revenue for the income statement or total assets for the balance sheet—analysts and stakeholders can more easily evaluate and compare financial performance and position.

This method enables users to identify trends over time within a single company or assess how well companies in the same industry are performing relative to each other. For instance, a common-size income statement allows stakeholders to understand how expenses and profits are structured in relation to revenues. This is particularly useful when comparing companies of different sizes or when analyzing how a company's financial metrics change over time. Such insights cannot be accurately gleaned from traditional financial statements, which often obscure the relative scale of line items.

In contrast, the other options focus on specific uses that do not align with the broader analytical purpose of common-size statements. For example, preparing compensation packages, calculating economic value added, or reporting earnings per share does not involve the comparative analysis that common-size financial statements provide. Thus, option B clearly emphasizes the comparative aspect that is at the heart of common-size financial statements.