Download - "Common Size Analysis" in Minneapolis 2011
Business Journalism
Boot Camp
Common Size Analysis
Oct. 4 , 2011
Common Size Analysis
Donald W. Reynolds National Center For Business Journalism At Arizona State University
Common Size Analysis
James K. Gentry, Ph.D. Clyde M. Reed Teaching Professor School of Journalism and Mass
Communications University of Kansas [email protected]
Common Size Analysis
Common Size Analysis A technique that turns all financial
statement entries into percentage of revenue
Then can look at percentage change and percentage point change
Common Size Analysis
Why Common Size Identify trends Identify what causes changes in totals
on financial statements Easier to compare percentages than
raw numbers Easier to compare companies Easier to compare company with
industry averages
Common Size Analysis
Doing Common Size For IS, divide Revenue into all entries. For BS, divide each total category into
its category items. For example, divide Total Assets into each category of assets.
For CF, divide each total category into its category items.
Common Size Analysis
Comparable Statements Often have to restructure Income
Statement to the In-the-Box format we studied
Typical problems come from items we would consider Other Income/Expenses
Common Size Analysis
Trends in Margins How have Cost of Goods Sold and
Sales, General & Administrative changed?
What does that mean for Gross Profit and Operating Profit?
How does Net Profit Margin move? Value of using Basis Points
Common Size Analysis
Common Size, Ratios These techniques let you drill below the
surface and start developing a more complete picture of the company’s performance Strengths Weaknesses Strategic effectiveness of the firm