Common Size Balance Sheet - Formula, Calculations (Step by Step)

Common Size Balance Sheet Chapters
00:00 Introduction
01:00 What is Common Size Balance Sheet
02:00 What is Common Size Balance Sheet
03:52 Common Size Balance Sheet Formula
04:32 Colgate's Case Study - Common Size Balance Sheet Analysis

In this video, we discuss about Common Size Balance Sheets, how to prepare
them and why they are so important. 

What is a Common Size Balance Sheet?
Common Size Balance Sheet refers to percentage analysis of balance sheet
items on the basis of the common figure as each item is presented as a
percentage that is easy to compare. 

Formula for Common Size Balance Sheet = (Line Item / Total Assets)*100

Uses of Common Size Balance Sheets:
1. Helps in building trend lines to discover the patterns over a specific
period of time
2. Helps understand the ratio and percentage of each line item clearly
3. Variations that occurred during expenses are reflected
4. Aids in comparison of income statements for two or more periods 
      
Limitations of Common Size Balance Sheet:
1. The reason behind the reduction of cash and cash equivalents remains
unclear
2. Inconsistencies in data of different years unaccounted for
3. Window dressing of financial statements
4. Fails to identify qualitative elements of a company’s performance
5. Doesn’t measure the solvency or liquidity of a company
#commonsizebalancesheet, #wallstreetmojo, #commonsizebalancesheetformula 

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