Common Size Balance Sheet Example

Common Size Balance Sheet Example

A company's financial statements, such as the income statement and common size balance sheet example for Anheuser Busch contained in table no. 01 and 02 in this post, can be difficult to interpret at first glance. Fortunately, such statements can be manipulated to make them more "user friendly" and more amenable to careful analysis. A common analytical procedure is the creation of common size statements. These modified statements are simply standardized versions of the company's balance sheets and income statements. The items are expressed as percentages instead of in dollars. Common size statements (or geico financial statements) can be extremely helpful to high light changes over time in the financial performance and financial condition of the company. 

Table No. 01

Anheuser Busch Companies, Inc. Annual Income Statement ($ millions, except per share amounts) Year Ended December 31

Common Size Balance Sheet Example

Common Size Income Statements and Balance Sheets

Common size statements provide a percentage breakdown of the income statement and balance sheet. In the common size income statement, each item is expressed as a percentage of sales. In the common size balance sheet, each asset, liability, or equity item is expressed as a percentage of total assets. Standardizing the income statement and balance sheet by making them sum to 100% can make it much simpler to spot changes or trends in the statements.

Table no. 03 contains the common size balance sheets for Anheuser Busch for 1991, 1992 and 1993. Table no. 04 contains the common size balance sheets for Anheuser Busch for the years ending December 31, 1991, 1992 and 1993. As you can see, the format of the common size financial statements is the same as the income statement and balance sheet in table no. 01 and 02. Expressing items as a percentage of sales or of assets gives the reader a feel for the relative sizes of the various items. This feel is harder to achieve when looking at the dollar amounts in the original statements.

Common size statements are especially helpful when looking at the financial statements of several companies. The balance sheets for the five companies in below table

Common Size Balance Sheet Example

are common sized, which makes comparisons easier. Because the sizes of the companies will differ, common size statements allow you to focus on the relative structures of the financial statements. You can spot structural differences between companies very easily with common size statements.

Common size statements are also used to track changes in a given company's financial statements over time. You can see very quickly which items have increased or decreased as a percentage of sales or assets. Because common size statements are easy to create and because they are easy to interpret, these statements are popular.

Table No. 02

Table No. 03

Table No. 4

Common Base Year Financial Statements

Another device that analysts use to track changes in a company's financial structure is common base year statements and common size balance sheet example. In these statements, a common base year is selected, such as five years ago. Then for each year after the base year, every income statement and balance sheet item is expressed as a percentage of its base year value. For example, if any item, such as cash, increases from its base year level, that item is expressed as a number exceeding 100%, and if the item decreases, it is expressed as some number less than 100%. It is easy to see which items are growing faster or slower than others in these common base year statements.