Common size income statement
/What is a Common Size Income Statement?
A common size income statement is an income statement in which each line item is reported as a percentage of net sales. The actual numbers may be reported adjacent to the percentages. This arrangement is used to examine changes in the percentages from period to period for financial analysis purposes. The format can also be used to compare expense percentages across different entities within the same industry.
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The Interpretation of Financial Statements
Advantages of a Common Size Income Statement
A common size income statement is quite useful when it is too difficult to extract meaningful information from the raw data. It is also useful for spotting trends in revenue and expense levels over an extended period of time, which may result in actionable information for management.