Common-size Income Statement Template

A common-size income statement expresses each item as a percentage of sales (or revenues). This allows you to analyze changes in a company’s cost structure over time.
The common-size income statement also shows you a company’s margins: how much of every sales dollar becomes profit.
The common-size income statement is also helpful in spotting significant fluctuations in the financial statements.
But a common-size income statement isn’t just used to assess a company’s performance over time. It’s also used to compare performance between companies.
Scaling each line item by sales is very helpful when comparing:
• Companies that report financial statements with different currencies
• Companies that are of different sizes
Example of Netflix vs Amazon common-size income statements
A common-size income statement is a great tool for seeing how well a company is managing its costs: both over time, and in comparison to its peers.
But you need to be careful when interpreting a common-size income statement. That’s because line items aren’t independent from one another.
Remember, a common-size income statement doesn’t tell you whether a company’s costs went up or down, it tells you a company’s costs as a percentage of sales.
0:00 Introduction
0:25 Identifying a company's margins
0:30 Spotting fluctuations in the financial statements
1:03 Comparing performance between companies
1:25 Example: Netflix vs. Amazon
2:39 Summary
2:49 Caveat: items aren't independent from one another
3:39 Conclusion
Here's the spreadsheet I used to create this video: docs.google.com/spreadsheets/...
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[@MyFinancialFocus]

I binge watched all of the videos on this channel twice.

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You are hardcore! Thank you so much for your support!

[@anatulymaimany]

Always loved your way of explaining things .

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Thank you so much! I'm so happy you're enjoying all the videos!

[@user-xl7gb1lc2y]

All respect and appreciation Dr.Michael

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Thank you my friend 😀

[@BadassBusinessOwners]

Great job explaining this! I refer to it as the power of stacking when I teach it to small business owners. Percentages give such good insight when looking year over year. Great job - Tammy

[@Edspira]

Thank you Tammy! I like the phrase you came up with!

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I don't know what it is, but this guy has got IT

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😎

[@eligho8767]

Same approach works great on balance sheets too!!

[@ethanstephens7320]

Great Video!

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Thank you, I'm glad you enjoyed it!

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Thank u. Can u add some details around CPG companies

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Wilson!!

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What’s up with the volleyball with someone’s face on it?

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It's the character "Wilson" (from the Tom Hanks movie Castaway). I usually have the volleyball in the background and people ask about it 😀

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🙌 Promo-SM.