Benefit of Common-Size Balance Sheet

Easy Analysis Techniques Common-size Statements

Common-size financial statements are a useful tool for analyzing the relative size of various financial items. They express each line item as a percentage of a base item. For example, in a common-size income statement, all items are expressed as a percentage of total revenue.

Why is preparing a common-size balance sheet beneficial for financial analysis?

It allows for comparison of a company’s financial position against industry averages.

It shows the absolute dollar amounts of all balance sheet items for detailed analysis.

It focuses solely on the growth rates of revenues over time.

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