Sunday, February 15, 2009

Common Size Balance Sheet

A common size balance sheet is a type of standardized financial statement that completely lists all of a firms specific assets, liabilities, and equity claims as a percentage of a firms total assets.

The common size ratio for each line on the financial statement is calculated as follows:

Common Size Balance Sheet Ratio:
Common Size Ratio = Item of Interest/ Reference Item

Common Size Ratio for Bonds Outstanding = Amount of Bonds/ Total Assets

These ratios are useful when conducting a cross- sectional analysis between different companies in the same industry. They can also give you a good idea of how the firm's financial condition has been changing over time. This type of analysis is called trend analysis and is often used by investors.

Additional Accounting Balance Sheet Example Problems:

Accounting Balance Sheet Example
Accumulated Depreciation Balance Sheet
Balance Sheet Questions
Financial Statements

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The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.