Common size statements

A common size statement turns every figure into a percentage of one base:

• in the statement of profit and loss, the base is revenue from operations = 100;
• in the balance sheet, the base is total assets (or total equity and liabilities, which is the same figure) = 100.

Item % = item ÷ base × 100.

Example: revenue from operations is 20,00,000 and employee benefits expense is 3,00,000. Employee benefits = 3,00,000 ÷ 20,00,000 × 100 = 15% of revenue.

Common size statements are useful to compare:

• different years of the same firm (intra-firm);
• firms of different sizes (inter-firm), because percentages remove size.

Look for shifts: if the cost of goods sold rises from 50% to 58% of revenue, the firm is keeping less of each rupee it sells.