What is a Common Size Statement?

Common size ratios are used to compare financial statements of different companies by displaying items as a percentage of a common base figure. By expressing the items in proportion to some size-related measure, this allows for easy analysis between companies or between time periods of the same company.

The common size ratio for each line on the financial statement is calculated as follows:

  Item of Interest
Common Size Ratio =  
  Reference Item

The ratios are expressed as percentages of the reference amount. Common size statements are prepared for the Income Statement and Balance Sheet.

Income Statement

Account Name Actual Data Common Size Data
Sales (Income) $980,000 100%
Cost of Sales (COGS) $750,000 77%
Gross Profit $230,000 23%
G & A Payroll Expense $100,000 10%
Interest Expense $9,000 1%
Net Profit before Taxes $55,000 6%
Net Income $55,000 6%

Balance Sheet

Account Name Actual Data Common Size Data
Cash (Bank Funds) $44,000 16%
Accounts Receivable $108,000 40%
Inventory $115,000 43%
Total Current Assets $267,000 99%
Gross Fixed Assets $43,000 16%
Total Assets $269,000 100%
Accounts Payable $83,000 31%
Total Liabilities $193,300 72%