Preparing statements for analysis
Common-size statements
Restate statements as percentages of revenue and total assets to see structure and change at a glance.
16 minintermediateMembers
Learning objectives
- Express income statement lines as a percentage of revenue
- Express balance sheet lines as a percentage of total assets
- Describe changes in percentage points, not percent
Rawdah's revenue grew from 1,240 to 1,497 over two years. Did costs grow faster or slower? Raw numbers make that hard to see, and impossible to compare with a peer three times the size.
Common-size (or vertical) analysis divides every line by a base: revenue for the income statement, total assets for the balance sheet. Each line becomes a share, so you can compare years and companies of any size directly.
Common-size % = Line item ÷ Base
- Base (income statement)
- revenue of the same year
- Base (balance sheet)
- total assets at the same date
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