A financial statement with every line shown as a percentage of one base figure, usually revenue or total assets.
A common-size statement restates each line of a financial statement as a percentage of a single base. On an income statement the base is revenue, so every cost reads as cents per dollar of sales; on a balance sheet the base is total assets. It lets you compare periods, or companies of different sizes, on the same scale.
Common-size percentage = line item / base figure × 100, for every line, with the base itself shown as 100%.
Revenue of $800,000 is 100%. Cost of goods sold of $480,000 is 60%, operating expenses of $200,000 are 25%, and operating profit of $120,000 is 15%. The percentages add up the same way the dollars do: 100% − 60% − 25% = 15%.
Percentages hide scale. Operating expenses can fall from 25% to 22% of revenue while growing in dollars, because revenue grew faster. Show the dollar column next to the percentages. A worked set of figures is in the profit and loss example.