In a common size balance sheet, each element of the balance sheet is presented as a percentage of total assets. A common-size statement helps in comparison of different companies as it eliminate the effects of size of the business. Common size income statement can be used to time-series analysis of the same company over time or to perform cross-sectional analysis across firms.
To prepare a common size balance sheet, we divide each entry in the balance sheet by the firm’s total assets.
Presented below is the common size balance sheet of a company for two years 2012 and 2013.