2. Common-Size Analysis
Common-size analysis is the restatement of financial statement information in a
standardized form.
Vertical common-size analysis uses the aggregate value in a financial statement for a given year
as the base, and each account’s amount is restated as a percentage of the aggregate.
Statement of financial position: Aggregate amount is total assets.
% change=X/Total assets*100
Statement of profit or loss account: Aggregate amount is revenues or sales.
% change =X/Revenue or sales*100
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, Example: Common-size analysis
Consider the CS Company, which reports the following financial information:
Year 2008 2009 2010 2011 2012 2013
Cash Shs.400.00 Shs 404.00 Shs 408.04 Shs 412.12 Shs 416.24 Shs 420.40
Inventory 1,580.00 1,627.40 1,676.22 1,726.51 1,778.30 1,831.65
Accounts receivable 1,120.00 1,142.40 1,165.25 1,188.55 1,212.32 1,236.57
Net plant and equipment 3,500.00 3,640.00 3,785.60 3,937.02 4,094.50 4,258.29
Intangibles 400.00 402.00 404.01 406.03 408.06 410.10
Shs Shs Shs Shs Shs Shs
Total assets 6,500.00 6,713.30 6,934.12 7,162.74 7,399.45 7,644.54
Create the vertical common-size analysis for the CS Company’s assets.
2
Common-size analysis is the restatement of financial statement information in a
standardized form.
Vertical common-size analysis uses the aggregate value in a financial statement for a given year
as the base, and each account’s amount is restated as a percentage of the aggregate.
Statement of financial position: Aggregate amount is total assets.
% change=X/Total assets*100
Statement of profit or loss account: Aggregate amount is revenues or sales.
% change =X/Revenue or sales*100
1
, Example: Common-size analysis
Consider the CS Company, which reports the following financial information:
Year 2008 2009 2010 2011 2012 2013
Cash Shs.400.00 Shs 404.00 Shs 408.04 Shs 412.12 Shs 416.24 Shs 420.40
Inventory 1,580.00 1,627.40 1,676.22 1,726.51 1,778.30 1,831.65
Accounts receivable 1,120.00 1,142.40 1,165.25 1,188.55 1,212.32 1,236.57
Net plant and equipment 3,500.00 3,640.00 3,785.60 3,937.02 4,094.50 4,258.29
Intangibles 400.00 402.00 404.01 406.03 408.06 410.10
Shs Shs Shs Shs Shs Shs
Total assets 6,500.00 6,713.30 6,934.12 7,162.74 7,399.45 7,644.54
Create the vertical common-size analysis for the CS Company’s assets.
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