Which financial metric is calculated by dividing each line item in a financial statement by total sales?

The financial metric described is commonly known as common size analysis. This method involves converting each line item of a financial statement into a percentage of total sales, which allows for easier comparison across periods or between different companies regardless of their size. By expressing financial data in this standardized way, common size analysis helps stakeholders understand the relative proportions of various components within a financial statement, such as expenses, profits, or assets, in relation to total sales. This technique is especially useful for benchmarking and analyzing cost structures or profitability across different entities in the same industry.

Understanding total sales as the base allows investors and analysts to see how each component of the financial statement reflects the company's overall performance, facilitating deeper insights into operational efficiency and financial health.