A common size income statement template is a financial statement that shows a company’s revenues and expenses as a percentage of total revenue. This can be used to compare a company’s financial performance over time or to compare different companies in the same industry. Common size income statement templates are also useful for understanding a company’s cost structure and profitability.
To create a common size income statement, you simply divide each line item on the income statement by total revenue. The resulting percentages show the relative importance of each line item to the company’s overall revenue.
Understanding a Common Size Income Statement
To understand a common size income statement, you need to look at the percentages for each line item. The higher the percentage, the more important the line item is to the company’s overall revenue. For example, if a company has a gross profit margin of 50%, it means that 50% of its revenue is left over after paying for its cost of goods sold.
You can also use a common size income statement to compare different companies. For example, if you are looking at two companies in the same industry, you can compare their common size income statements to see which company has the higher gross profit margin, net profit margin, and other key financial ratios.
Using a Common Size Income Statement Template
There are many different ways to use a common size income statement template. Here are a few examples:
- Track your company’s financial performance over time. By comparing your company’s common size income statement from year to year, you can see how your company’s revenue and expenses have changed.
- Compare your company to other companies in your industry. By comparing your company’s common size income statement to the common size income statements of other companies in your industry, you can see how your company’s financial performance compares.
- Identify areas for improvement. By looking at your company’s common size income statement, you can identify areas where your company can improve its financial performance. For example, if you see that your company has a low gross profit margin, you may need to find ways to reduce your cost of goods sold.
Conclusion
A common size income statement template is a valuable tool for understanding a company’s financial performance. By using a common size income statement template, you can track your company’s financial performance over time, compare your company to other companies in your industry, and identify areas for improvement.
If you are looking for a common size income statement template, there are many resources available online. You can also find common size income statement templates in financial software programs.
