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Common Size

Stock Investor Pro provides quarterly and annual financial statement data for select financial statement items. In addition to total and percentage change figures that are provided for quarterly financial statement data, Stock Investor Pro includes per share amounts and common size financial statements.

Financial Statements - Annual

Stock Investor Pro includes select income statement, balance sheet and cash flow statement data for the past seven years annually.

The Fin - Ann’l tab gives you the option of looking at the data on a total dollar basis as well as on a per share basis, a percentage change year-to-year basis and common-size financials basis.

Common-size financials are useful when analyzing trends in a company or when comparing several companies, especially if they are of differing sizes. In creating common-size balance sheet and income statements, the goal is to create relative figures using a scaling factor. For the balance sheet, the scaling factor is total assets, and for the income statement it is sales. Therefore, all the income statement line items are divided by sales, while all balance sheet line items are divided by total assets. The images below show the common-size income statement and balance sheet for Apple, Inc. (AAPL). Over the last seven years, Apple has been able to lower its operating expenses as a percentage of sales by over 20 percentage points, thereby boosting its operating income. This has been felt by the company’s bottom line, where net income as a percentage of sales has risen over 16 percentage points since 2006.

On the balance sheet side, common-size financials allow you to see if there are trends developing in the area where the company is receiving its capital and utilizing it. In Apple’s case, the company’s assets have shifted over the years from a majority in current assets to a large portion in long term investments now. Total current assets, which consist of cash, short-term investment, inventories, etc., as a percentage of total assets, have dropped by over 50 percentage points since 2006. This trend is not surprising. Though Apple has been incorporated for a number of years, it has recently gone through a tremendous growth period. The company needed to expand operations significantly in order to keep up with the boom in demand for its products leading to an increase in long-term investments. On the liability side, Apple famously does not take on any debt (though the company has recently announced that it will use debt to return capital to shareholders). As you can see, Apple has kept its short- and long-term debt at 0% and has slowly decreased its current liabilities such as accounts payable. Companies that have a very high percentage of liabilities to total debt and equity find it difficult, or more expensive, to issue additional debt should the need arise.

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