Common Size Statement

Introduction

A common size statement is a tool of financial statement analysis.  Common statements include balance sheet and income statements are shown in analytical percentages. In common size statements, the various figure is shown as a percentage of total assets, total sales, and total liabilities. Total assets are taken as 100% and different assets are expressed as a percentage of the total assets. Similarly  the total liabilities are taken as 100% and different liabilities are expressed as a percentage of the total liabilities.


There are two types of common size statements:

  • Common-size Balances Sheet
  • Common size Income Statement

There is an example to understand the common size balance sheet of the company.

Common-size balance sheet

 

Particulars

Rama’s Co.

Amount $’000

Sham Co.

Amount $’000

Preference share capital ‘

Equity shares capital

Reserve and surplus

Long – Term Loans

Bills payable

Sundry creditors

Outstanding expense

Proposed dividend

 

 

Land and Building

Plant and machinery

Temporary Investment

Inventories

Books- debts

Prepaid expenses

Cash and bank balance

12000

150

14

115

2

12

15

10

16000

400

18

130

4

6

90

438 808
 

80

334

1

10

4

1

8

 

123

600

40

25

8

2

10

  438 808

Common size Balance Sheet

As on Dec. 31 2015

Particulars Rama’s co. Sham Co.
Amount

$’000

Percentages

%

Amount

$’0000

Percentage

%

Fixed assets

Land and building

Plant and machinery

80

334

18.26

76.26

123

600

15.22

74.62

Total fixed assets 414 94.52 723 89.48
Current assets

Temporary assets

Inventories

Books debt

Prepaid expenses

Cash and balance

1

10

4

1

8

0.23

2.28

0.91

0.23

1.83

40

25

8

2

10

4.95

3.08

0.99

0.25

1.25

Total Current assets 24 5.48 85 10.52
Total Assets 438 100.00 808 100
Share capital and reserve

Preference share capital

Equity shares capital

Reserve and surpluses

Total capital and reserve

120

150

14

284

27.39

34.25

3.19

64.83

160

400

18

578

19.80

49.50

2.23

71.53

Long-term loans 115 26.25 130 16.09
Current liabilities

Bills payable

Sundry creditors

Outstanding expenses

Proposed dividend

2

12

15

10

0.46

2.74

3.44

2.28

4

6

90

0.49

0.74

11.15

Total current Liabilities 39 8.92 100 12.38
Total liabilities 438 100 808 100
Example:-

Common Size Income Statement

Particulars 2014

Amount $’000

2015

Amount$’ 000

Sales

Others Incomes

Expenses

Cost of sale

Office expense

Selling expense

Interest

500

20

520

325

20

30

25

700

15

715

510

25

45

30

 

Solution

Common – Size Income Statement

For the year ending Dec 2014 and 2015

Particulars 2014 2015
Amount

$(000)

% Amount

$(000)

%
Sales

Less: Cost of sale

500

325

100

65

700

510

100

72.86

Gross Profit 175 35 190 27.14
Operating expenses

Office expenses

Selling expenses

Total operating Expenses

Operating profits

Other Incomes

Total income

Less Non-operating Expenses

Net profits

20

30

4

6

25

45

3.58

6.42

50 10 70 10.0
125

20

25

4

120

15

17.14

2.14

145

25

29

5

135

30

19.28

4.28

120 24 105 15

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