Common-size financial statement

A financial statement that report its items as the percentage of a common figure (for example total assets or sales). Each item of the financial statement is reported as percentage of that figure


Common size financial statement is used as analytic and comparison tool, companies use these balance sheets to compare with competitors common size balance Sheets and to analyse their performance in short and long run. Since these balance sheets or financial statement are based on percentage, a company can compare its performance with other large or small companies performance without worrying about actual values of balance sheet items and It is nearly impossible to directly compare the financial statements for two companies because of differences in sizes of these companies, therefore companies try to standardize the financial statements in the form of common size statements.

A common size balance sheet is like that:

ASSETS                                                                   EQUITY AND LIABILITIES

Cast                20%                                                    Capital            40%
Bank               10%                                                    Net Profit        10%
Inventories       10%                                                    Creditor           25%
Building           60%                                                    Note payable   25%
Total assets   100%                                                    Total             100%