Common Size Analysis

Indicates the proportion of an asset/liability/expense as a function of total assets/liabilities/revenue.

Things to remember

Compares what proportion that an expense reduces sales, especially useful when comparing previous years.
It is also useful when comparing similar companies of different sizes to see if they have the same financial structure.

Consolidated financial statements, including balance sheet, statement of changes in financial position and income statement for Cory’s Tequila Co. for 1998 and 1999. — Balance Sheet

Statement of changes in financial position — Statement of cash flow

Consolidated income statement for Cory’s Tequila Co. for 1998 and 1999 — Income statement

For Cory's Tequila Co.	1999	1998
Sales	100%	100%
COGS	35%	34%
Other Expenses	40%	41%
Net Income	17%	16%

Common Size Analysis:

Looking at the chart above you wouldn't really think that there is anything that useful to compare. That is because Cory's Tequila Co. has done an excellent job maintaining its pricing and expenditure strategy. Ideally you would like to see Cost of Goods Sold (COGS) go down each year because of increased efficiencies. It also tells us that every $1 of sales contributes 17 cents to the bottom line of Cory's Tequila Co. - a healthy profit margin.