0:00 A common-size income statement expresses each item as a percentage of sales (or revenues). This allows you to analyze changes in a company’s cost structure over time. 0:25 The common-size income statement also shows you a company’s margins: how much of every sales dollar becomes profit. 0:39 The common-size income statement is also helpful in spotting significant fluctuations in the financial statements. 1:03 But a common-size income statement isn’t just used to assess a company’s performance over time. It’s also used to compare performance between companies. 1:12 Scaling each line item by sales is very helpful when comparing: • Companies that report financial statements with different currencies • Companies that are of different sizes 1:25 Example of Netflix vs Amazon common-size income statements 2:39 A common-size income statement is a great tool for seeing how well a company is managing its costs: both over time, and in comparison to …
