What is a Common-Size Financial Statement?
A common-size financial statement is an income statement or balance sheet in which each line items are expressed as a percentage of sales or assets, respectively.
How Does a Common-Size Financial Statement Work?
For example, let's assume that Company XYZ's income statement looks like this:
The right side of the income statement, which shows each expense as a percentage of sales, is a common-size income statement.
Why Does a Common-Size Financial Statement Matter?
Common-size financial statements facilitate easy comparison. Not only can readers easily see how much of every dollar goes to rent, for example, they can compare that percentage to other companies or other periods in time. This allows analysts to compare companies of different sizes and not be "blinded" by the size differences inherent in the raw data.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
