|
|
| Common
Size Analysis |
|
Indicates
the proportion of an asset/liability/expense is as a function of
total assets/liabilities/revenue.
Things
to remember |
- Compares
what proportion that an expense reduces sales, especially
useful when comparing previous years.
- It
is also useful when comparing similar companies of different
sizes to see if they have the same financial structure.
|
For
Cory's Tequila Co. |
1999 |
1998 |
Sales |
100% |
100% |
COGS |
35% |
34% |
Other
Expenses |
40% |
41% |
Net
Income |
17% |
16% |
|
|
Common
Size Analysis:
Looking at the chart above you wouldn't really think that there
is anything that useful to compare. That is because Cory's Tequila
Co. has done an excellent job maintaining its pricing and expenditure
strategy. Ideally you would like to see Cost
of Goods Sold (COGS) go down each year because of increased
efficiencies. It also tells us that every $1 of sales contributes
17 cents to the bottom line of Cory's Tequila Co. - a healthy profit margin.
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