Common-size analysis involves expressing financial data, including entire financial statements, in relation to a single financial statement item, or base.
Common-Size Analysis of the Balance Sheet A vertical common-size balance sheet, prepared by dividing each item on the balance sheet by the same period’s total assets and expressing the results as percentages, highlights the composition of the balance sheet.
Common-Size Analysis of the Income Statement
A vertical common-size income statement divides each income statement item by revenue, or sometimes by total assets (especially in the case of financial institutions). If there are multiple revenue sources, a decomposition of revenue in percentage terms is useful.
