What is a Common Size Income Statement and How to Create it in USA?

In this article, you will get to know about  What is a Common Size Income Statement and How to Create it in USA? A common-size income statement is a mixture statement of both income and expenses. This helps businesses analyse their income and a percentage of sales.

What is a Common Size Income Statement?

It facilitates the comparisons between the time period, industries and companies. This is created by dividing each line item by their total revenue. To know further essential information regarding the Common Size Income Statement, how to create this, its benefits, and more, continue browsing this article.

A common size income statement is the financial report that helps to investigate the company’s income and expenses, which is rather in dollar amounts. The business can reflect the size of their sold goods cost, compare the total revenue, and refer to the top line of the income statement.

The Common Size Statement displays the entries in percentages rather than absolute numerical figures, which makes it easy to analyze and compare companies of different sizes over time. This statement contains the income statement, cash flow and balance sheet together.

The Common Size Income Statement reports and analyzes the comparison of two or more different companies of diverse sectors. This is created in such a way that makes complete formatting of the financial statement in a way that allows for analysis of the company over a period of time. This makes it easier to determine the company’s profit in the income statement and helps to compare the profits with a similar business.

This statement represents all the items as a percentage of the total cash flow. This is popular for expressing the cash flow in terms of the total operational cash flow from investing activities and the total of the financing activities over the period of time.

How do you Create a Common Size Income Statement?

You can create a common-size income statement with your regular income statement. Through this, you can find the base figures for the complete calculation related to your cost and profits according to a percentage of revenue.

To create this statement, you are required to divide all the expenses into a percentage of sales, then set the revenue at 100 per cent, and after that, calculate the percentage of each item by using this formula.

Amount/ Base Amount X 100

This common income statement can be made in Excel by using a template like

Through this, the companies can make a comparison of their sales and total revenue from the past and with other similar companies. All businesses have a certain number of sales or services for their product. With this, the income from selling or providing services is shown up with an operating profit.

To create the Common Size Income Statement, you must first make a separate column. Then, divide each column line with your income statement with the total sales. After that, place all the results with the corresponding adjacent cells in the separate cells of the income statement. Then, present the result in terms of the percentage.

This formula is commonly used for the analysis of the total amount into the divided line with the total sums based on the item. This statement is made to appeal to a research-intensive with a tend to focus on the research and development of the company within the period of time.

Benefits of Common Size Income Statement

This statement helps the individual in main different ways, which include:

• Understanding the profitability of the companies with their each line and time.
• For comparing the profits and expenses with other companies that determine the performance with the competitors.
• Helps to identify the significant changes in the financials.
• It provides help in evaluating the financial strength of how income is used for where the revenue is generated, etc.

These are some of the benefits of the common-size statement in the USA.

ITG Home