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"Common Size Analysis" in Minneapolis 2011


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Jimmy Gentry presents "Common Size Analysis" in Minneapolis on Oct. 4, 2011 at the Star Tribune during the Reynolds Center's free workshop, "Business Journalism Boot Camp."

For more information about training for business journalists, please visit

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"Common Size Analysis" in Minneapolis 2011

  1. 1. Business Journalism Boot Camp <ul><ul><ul><ul><ul><li>Common Size Analysis </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Oct. 4 , 2011 </li></ul></ul></ul></ul></ul>
  2. 2. <ul><li>Donald W. Reynolds National Center </li></ul><ul><li>For Business Journalism </li></ul><ul><li>At Arizona State University </li></ul>Common Size Analysis
  3. 3. <ul><li>James K. Gentry, Ph.D. </li></ul><ul><li>Clyde M. Reed Teaching Professor </li></ul><ul><li>School of Journalism and Mass Communications </li></ul><ul><li>University of Kansas </li></ul><ul><li>[email_address] </li></ul>Common Size Analysis
  4. 4. Common Size Analysis <ul><li>A technique that turns all financial statement entries into percentage of revenue </li></ul><ul><li>Then can look at percentage change and percentage point change </li></ul>Common Size Analysis
  5. 5. Why Common Size <ul><li>Identify trends </li></ul><ul><li>Identify what causes changes in totals on financial statements </li></ul><ul><li>Easier to compare percentages than raw numbers </li></ul><ul><li>Easier to compare companies </li></ul><ul><li>Easier to compare company with industry averages </li></ul>Common Size Analysis
  6. 6. Doing Common Size <ul><li>For IS, divide Revenue into all entries. </li></ul><ul><li>For BS, divide each total category into its category items. For example, divide Total Assets into each category of assets. </li></ul><ul><li>For CF, divide each total category into its category items. </li></ul>Common Size Analysis
  7. 7. Comparable Statements <ul><li>Often have to restructure Income Statement to the In-the-Box format we studied </li></ul><ul><li>Typical problems come from items we would consider Other Income/Expenses </li></ul>Common Size Analysis
  8. 8. Trends in Margins <ul><li>How have Cost of Goods Sold and Sales, General & Administrative changed? </li></ul><ul><li>What does that mean for Gross Profit and Operating Profit? </li></ul><ul><li>How does Net Profit Margin move? </li></ul><ul><li>Value of using Basis Points </li></ul>Common Size Analysis
  9. 9. Common Size, Ratios <ul><li>These techniques let you drill below the surface and start developing a more complete picture of the company ’s performance </li></ul><ul><ul><li>Strengths </li></ul></ul><ul><ul><li>Weaknesses </li></ul></ul><ul><ul><li>Strategic effectiveness of the firm </li></ul></ul>Common Size Analysis