From the course: Corporate Financial Statement Analysis
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Common size balance sheet
From the course: Corporate Financial Statement Analysis
Common size balance sheet
- Now look at the common-size balance sheet, in particular, the assets in the common-size balance sheet. Now these percentages might be a little harder for us to understand, so let's start by looking at the property, plant, and equipment numbers. For Uncertain Company, 40%, for Benchmark Company, 30%. So what does 40% mean? For Uncertain Company to do $100 of sales requires having $40 in property, plant, and equipment. In contrast, Benchmark Company can do the same $100 of sales with only $30 of property, plant, and equipment. Benchmark Company is much more efficient at using its property, plant, and equipment to generate sales than is Uncertain Company. Uncertain Company, for some reason, needs more property, plant, and equipment laying around. Now the same is true for accounts receivable. Uncertain Company has a large level of accounts receivable compared to its sales. When compared to Benchmark Company, it's 20% to 11%. For some reason, Uncertain Company has a higher level of…
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