Common size financial statement, Financial Management

Common Size Financial Statement

Common Size Financial Statement is a company financial statement that shows all items as percentages of a common base figure. This kind of financial statement permits for simple analysis between companies or among time periods of a company.

The values on the common size statement are shown as percentages of a statement component like revenue. Whereas most firms don't show their statements in common size, it is advantageous to calculate if you want to examine two or more companies of differing size against each other. 

Formatting financial statements in this way lessens the bias that can takes place when evaluating companies of differing sizes. It also permits for the analysis of a company over different time periods, revealing, for instance, what percentage of sales is cost of goods sold and how that price has changed over time.

 

 

Posted Date: 7/25/2012 8:20:55 AM | Location : United States







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