Common-sized financial statements

Common-sized financial statements:
· Express all in % of sale to allow easy comparison of different sized firms.
· Useful for time-series and cross-sectional analysis and facilitate the comparison for firms of different size

Income statement:
Income statement items as a % of sales,

% value of income statement account = Income statement account / Total Sales (Revenues)

Note:
· It is more meaningful to present income tax expenses as an effective rate than as a % of sales. Effective rate = income tax / pre-tax income

Balance Sheet:
Balance sheet items as a % of assets

% value of balance sheet account = Balance sheet account / Total Assets