Common size, or vertical analysis, is a method of evaluating financial information by expressing each item in a financial statement as a percentage of a base amount for the same time period. A company can use this analysis on its balance sheet or its income statement.
What is common size in accounting?
Definition: A Common Size Balance Sheet is a financial statement that presents the assets, liabilities, and equity of a business with each line item shown as a percentage of the total category.
How do you find the common size ratio?
- Add all the line items on the financial statement you’re analyzing.
- Choose a single line item from the statement.
- Take the value of that item and divide it by the total to get a percentage.
