What Common size Financial Statement actually is?

you are all probably often heard about common size financial statement, but you don't know what actually is it, right? Same as me.

In this week, I would post about what is common size financial statement. For analyzing financial statement, there are eight analysis techniques, one of them is common size statement. Common size financial statement is related to as known as vertical analysis. From Accounting coach website, Common size financial statements defined as present financial statement amount as a percentage of a base number. For example, common size income statement will report the revenue and expense amounts as percentages of net sales. The common size balance sheet will report each asset, liability, and owner equity amount as a percentage of total assets.

The purpose of common size statement analysis to obtain the illustration about composition and proportion a investment on every types of assets, structure of equity and funding, and distribution of sales revenue on cost and revenue.

Common size financial statement analysis is useful for understanding forming internal financial statement. income statement and other comprehensive income common size analysis could provide better perspective for evaluating cost-cutting efforts. It also beneficial to comparisons between companies, because financial statement of differences companies formed in common size

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