Common size statement is also known as common size analysis. It is another technique of analyzing the items of financial statements on relative terms. This technique is based on the calculation of the percentage of every item in the income statements and balance sheets for past several years. It helps to check the performance trend of each item during the period under analysis.
The common size analysis is carried out for a period of one or more years. The income statement items are divided by total assets and expressed as a percentage of total assets. These percentages calculated in the same manner for the industry, and the competitors. Thus, the comparison shows the company's performance relative to industry, competitors as well as compared to its own past record.
The common size analysis is carried out for a period of one or more years. The income statement items are divided by total assets and expressed as a percentage of total assets. These percentages calculated in the same manner for the industry, and the competitors. Thus, the comparison shows the company's performance relative to industry, competitors as well as compared to its own past record.
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