Jimmy Gentry presents "Common Size Analysis" during Reynolds Business Journalism Week 2013. Reynolds Business Journalism Week is an all-expenses-paid seminar for journalists looking to enhance their business coverage, and professors looking to enhance or create business journalism courses. For more information about business journalism training, please visit businessjournalism.org.

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