Common Size Balance Sheet
Definition of 'Common Size Balance Sheet'
A balance sheet that displays both the numeric value of all entries and the percentage each entry is relative to the total value of related entries. On a common size balance sheet, an asset is compared to total assets, a liability to total liabilities and stockholder equity to total stockholder equity.
Investopedia explains 'Common Size Balance Sheet'
Common size balance sheets make it easier to analyze changes to a company’s balance sheet over multiple time periods. By indicating a percentage in addition to the actual entry value, analysts can tell not only if the total value of a company’s inventory increased in real terms compared to the previous year, but whether the inventory represents the same percentage of total assets.
Common size balance sheets are not a type of financial reporting required in GAAP, but are useful for business owners. In order to create the sheet, the business must first determine its total assets, total liabilities and total stockholder equity. The business then adds a column to its standard balance sheet that will contain the percentage of each item compared to the total. Each major entry type on the sheet is then divided by the total value of its category.