Business Journalism Professors 2014: Common Size Analysis by Jimmy Gentry
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Business Journalism Professors 2014: Common Size Analysis by Jimmy Gentry

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Jimmy Gentry presents "Common Size Analysis" during the Reynolds Center for Business Journalism's annual Business Journalism Week, Jan. 4, 2014. Gentry is the Clyde M. Reed Teaching Professor at......

Jimmy Gentry presents "Common Size Analysis" during the Reynolds Center for Business Journalism's annual Business Journalism Week, Jan. 4, 2014. Gentry is the Clyde M. Reed Teaching Professor at the University of Kansas' School of Journalism and Mass Communications.

The annual event features two concurrent seminars, Business Journalism Professors and Strictly Financials for journalists.

For more information about business journalism training, please visit http://businessjournalism.org.

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  • 1. Common Size Analysis Business Journalism Professors Jan. 3, 2014
  • 2. Donald W. Reynolds National Center For Business Journalism At Arizona State University Strictly Financials 2
  • 3. n  n  n  n  n  James K. Gentry, Ph.D. Clyde M. Reed Teaching Professor School of Journalism and Mass Communications University of Kansas jgentry@ku.edu Strictly Financials 3
  • 4. Common Size Analysis n  n  A technique that turns all financial statement entries into percentage of revenue Then can look at percentage change and percentage point change Strictly Financials 4
  • 5. Why Common Size n  n  n  n  n  Identify trends Identify what causes changes in totals on financial statements Easier to compare percentages than raw numbers Easier to compare companies Easier to compare company with industry averages Strictly Financials 5
  • 6. Doing Common Size n  n  n  For IS, divide Revenue into all entries. For BS, divide each total category into its category items. For example, divide Total Assets into each category of assets. For CF, divide each total category into its category items. Strictly Financials 6
  • 7. Comparable Statements n  n  Often have to restructure Income Statement to the In-the-Box format we have studied Typical problems come from items we would consider Other Income/Expenses Strictly Financials 7
  • 8. Trends in Margins n  n  n  n  How have Cost of Goods Sold (CGS) and Sales, General and Administrative (SGA) changed? What does that mean for Gross Profit Margin and Operating Profit Margin? How does Net Profit Margin move? Importance of using Basis Points Strictly Financials 8
  • 9. Common Size, Ratios n  These techniques let you drill below the surface and start developing a more complete picture of the company’s performance n  n  n  Strengths Weaknesses Strategic effectiveness of the firm Strictly Financials 9