Common-Size Statements

Definition

Common-size statements are financial reports that present information in a standardized format, making it easier to compare and analyze data. In these statements, each line item is shown as a percentage of a base amount, such as total assets or total sales. This allows for a better understanding of the proportions and trends within the financial statements. Common-size statements help in comparing companies of different sizes or industries, identifying areas of strength or weakness, and making informed decisions. They provide a standardized way to analyze financial information and spot patterns or changes over time.

Further Explanation

Common-size statements, also known as common-size financial statements, are financial reports that present financial information in a standardized format, allowing for easy comparison and analysis. In common-size statements, each line item is expressed as a percentage of a chosen base amount.

The base amount used in common-size statements can vary. It is typically either total assets for balance sheets or total sales/revenue for income statements. By expressing each line item as a percentage of the base amount, it provides a relative picture of the composition and proportions of different elements within the financial statement.

Common-size statements make it easier to identify trends, patterns, and variations in financial data across different periods or companies. They help in comparing the financial performance and structure of companies of different sizes or industries.

For example, in a common-size balance sheet, each asset and liability item is expressed as a percentage of total assets, which allows for better understanding of the asset composition, debt levels, and other financial ratios. In a common-size income statement, each revenue and expense item is expressed as a percentage of total sales, enabling analysis of the relative significance of different revenue sources or expense categories.

By using common-size statements, analysts can identify areas of strength or weakness, assess the impact of changes in financial ratios over time, and make more informed investment or managerial decisions. It provides a standardized framework for financial analysis and facilitates comparisons within and across industries.

Why Appoint Valtech as Valuation Adviser?

Valtech’s team has provided valuation advice to over 200 listed companies in Hong Kong, China, Singapore, Taiwan, Australia, the United Kingdom, the United States and Germany.

Valtech Valuation is a professional valuation firm accredited with ISO-9001 in valuation advisory services. The financial market and valuation requirements are highly dynamic. We are determined to develop and maintain a quality management system to foster an environment which is sustainable and evolving continuously. Our founders stress on development of a system and an environment that our consultants are provided with necessary support and opportunities to thrive.

We are a team of professionals from multiple disciplines including audit, financial modelling, tax, internal control and surveying. Our management adheres professional excellence. Abundant resources are reserved to develop standardized policies and procedures for quality control. We have solid track record in valuation advisory for listed companies, private equity, fund managers and financial institutions. We work closely with big four and other international accounting firms, corporate financial advisors, fund managers and legal advisors.

Valtech Advantages:

Advanced Valuation Techniques: Valtech Valuation can develop and implement advanced valuation techniques that are specifically tailored to the needs of clients. These techniques can go beyond traditional valuation methods and incorporate factors such as market trends, industry benchmarks, and risk analysis to provide more accurate and insightful valuations.

Customized Valuation Models: Valtech Valuation can create customized valuation models that align with the unique investment strategies and asset classes. By understanding the specific requirements and objectives of these entities, Valtech Valuation can develop models that capture the nuances of their portfolios, resulting in more precise and relevant valuations.

Data-driven Insights: Valtech Valuation can leverage its access to comprehensive data sources and analytics tools to provide data-driven insights. By analyzing market data, economic indicators, and performance metrics, Valtech Valuation can offer valuable insights into the valuation of assets, identify emerging trends, and help inform investment decision-making.

Adherence to Compliance and Reporting Standards: Valtech Valuation can ensure that valuation practices adhere to regulatory compliance and reporting standards. By staying updated on relevant regulations, such as accounting standards and industry guidelines, Valtech Valuation can help clients meet their reporting obligations accurately and in a timely manner.