Question

Explain the term common size balance sheet.

Answer 1

common-size balance sheet definition. A company's balance sheet that shows each item's amount after it has been divided by the amount of total assets. In other words, current assets will be shown as a percentage of total assets. This will allow comparisons between companies of different size.

Most companies express each item on the balance sheet in terms of total assets. Divide each dollar amount by the total assets and multiply by 100. In this case, the percentages are: Cash, 2 percent; Accounts Receivable, 1.8 percent; Supplies, 0.2 percent; Equipment, 16 percent; Land, 20 percent; Building, 60 percent.

Answer 2

A Common Size Balance Sheet is a financial statement showing a business assets, liabilities, and the equity.

• A common size balance sheet is useful for comparing the proportions of assets, liabilities, and equity among different companies, particularly as part of an analysis of industry or an analysis of acquisitions.
• Creating a standard size balance sheet that lays out the results at the end of multiple time periods is extremely useful in order to build trend lines and assess changes over longer periods of time.