Create a new excel worksheet in the same excel file and name it Common Size. Copy the financial statements from your first worksheet (Financial Statements) to this new worksheet. This will be the basis of your common size calculations. Right next to the financial statement information, construct the common-size financial statements.

Remember common sizing is dividing each balance sheet item by the Total Asset item of the same year, dividing each income statement item by the Total Sales (or Total Revenue) item of the same year. You will do that for each of the five years.

Common size financial statements:

1. Help us compare firms of different sizes.

2. Help us understand the composition of assets, and liabilities, as well as the expenses.

After constructing the common size financial statements of your company, write one paragraph discussion for common-size balance sheet and one paragraph for common-size income statement. As you will see, you can give more precise information about our companies since we are working with percentages now.

Make sure that you are not discussing only the change over time (this you will do in the next step). The purpose is to focus on the composition of assets and liabilities on the common-size balance sheet and how that composition changes over time since we have five years of date. Similarly, you will focus on the expenses as a percentage of sales on the common-size income statement and how those percentages had changed over time.