Common Size Analysis Template Strictly Confidential

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Common Size Analysis

Income Statement Company A Percent Company B Percent

Revenue 100,000 100% 550,000 100%
COGS 70,000 70% 390,000 71%
Gross Profit 30,000 30% 160,000 29%

Operating Expenses
Research and Development 10,000 10% 37,000 7%
Advertising 3,000 3% 11,900 2%
General and Administrative 2,000 2% 10,800 2%
Total Operating Expenses 15,000 15% 59,700 11%

Operating Income 15,000 15% 100,300 18%

Interest Expense 2,000 2% 28,000 5%
Income Before Income Taxes 13,000 13% 72,300 13%
Income Tax Expense 3,000 3% 26,000 5%
Net Income 10,000 10% 46,300 8%

Regular Profit Analysis Common Size Profit An

600,000 100%
90%
500,000
80%
400,000 70%
60%
300,000 50%
40%
200,000 30%
100,000 20%
10%
- 0%
Company A Company B Company A C

Revenue Net Income Revenue Net Income

 This file is for educational purposes only. E&OE

Corporate Finance Institute®

https://corporatefinanceinstitute.com/

on Size Profit Analysis

any A Company B

Revenue Net Income

XYZ CORP
(000's)

Review Review
BALANCE SHEET 9/30/x9 Percent 9/30/x0

ASSETS
Cash & Cash Equivalents $ 700 26.8% $ 749
Marketable Securities $ - 0.0% $ -
Trade Receivables (Net) $ 495 19.0% $ 495
Inventories $ 999 38.3% $ 1,120
Cash Val Life Insurance $ 10 0.4% $ -
Other Current Assets $ - 0.0% $ -
TOTAL CURRENT ASSETS $ 2,204 84.5% $ 2,364

Fixed Assets (Net) $ 205 7.9% $ 157

Investments $ - 0.0% $ -
Intangibles $ 180 6.9% $ 165
Other Non-Current Assets $ 20 0.8% $ 1
TOTAL NON-CURRENT ASSETS $ 405 15.5% $ 323
TOTAL ASSETS $ 2,609 100.0% $ 2,687

XYZ CORP
(000's)

Review Review
BALANCE SHEET 9/30/x9 Percent 9/30/x0

LIABILITIES
Notes Payable - Short Term $ - 0% $ -
Current Maturities L.T. Debt $ - 0% $ 18
Trade Payables $ 49 2% $ 110
Income Taxes Payable $ 11 0% $ 20
Accrued Expenses $ 97 4% $ 37
Deferred Tx - Current $ - 0% $ 3
TOTAL CURRENT LIABILITIES $ 157 6% $ 188
0%
Long Term Debt $ 301 12% $ 324
Other Non-Current Liabilities $ - 0% $ -
Subordinated Debt $ - 0% $ -
 Deferred taxes $ - 0% $ 4
TOTAL LIABILITIES $ 458 18% $ 516

EQUITY
Preferred Stock $ - 0% $ -
Common Stock $ 80 3% $ 69
Contr. Capital in Excess of Par $ 320 12% $ 173
Retained Earnings $ 1,755 67% $ 1,929
Treasury Stock $ (4) 0% $ -
NET WORTH / OWNER'S EQUITY $ 2,151 82% $ 2,171
0%
TOTAL LIABILITIES AND NET WORTH $ 2,609 100% $ 2,687
 Qualified
Percent 9/30/x1 Percent

27.9% $ 620 22.4%

0.0% $ - 0.0%
18.4% $ 522 18.9%
41.7% $ 1,302 47.0%
0.0% $ - 0.0%
0.0% $ - 0.0%
88.0% $ 2,444 88.3%

5.8% $ 152 5.5%

0.0% $ - 0.0%
6.1% $ 150 5.4%
0.0% $ 23 0.8%
12.0% $ 325 11.7%
100.0% $ 2,769 100.0%

Qualified
Percent 9/30/x1 Percent

0% $ - 0%
1% $ 85 3%
4% $ 92 3%
1% $ 4 0%
1% $ 22 1%
0% $ 5 0%
7% $ 208 8%
0% 0%
12% $ 239 9%
0% $ - 0%
0% $ - 0%
 0% $ 10 0%
19% $ 457 17%

0% $ - 0%
3% $ 69 2%
6% $ 158 6%
72% $ 2,085 75%
0% $ - 0%
81% $ 2,312 83%
0% 0%
100% $ 2,769 100%
XYZ CORP
(000's)
Review
INCOME STATEMENT 9/30/x9 Percent
NET SALES 3543 100%
Cost of Goods Sold 2061 58%
GROSS PROFIT 1482 42%

Selling Expense 574 16%

Gen'l & Admin. Expense 420 12%
Depreciation & Amort'n Expense 31 1%
Lease & Rental Expense 0 0%
Officers' Compensation 63 2%
Bad Debt Expense 42 1%
TOTAL OPERATING EXPENSES 1130 32%
OPERATING PROFIT (EBIT) 352 10%

Other Income 26 1%
Other Expense 0 0%
EBIT 378 11%

Interest Expense 52 1%
PROFIT BEFORE TAX (EBT) 326 9%

Income Tax 137

Extraordinary Items 0 0%
NET INCOME 189 5%
Review Qualified
9/30/x0 Percent 9/30/x1 Percent
3879 100% 4077 100%
2433 63% 2658 65%
1446 37% 1419 35%

613 16% 575 14%

300 8% 325 8%
31 1% 22 1%
0 0% 0 0%
67 2% 71 2%
40 1% 31 1%
1051 27% 1024 25%
395 10% 395 10%

43 1% 45 1%
0 0% 0 0%
438 11% 440 11%

34 1% 44 1%
404 10% 396 10%

169 152
0 0% 0 0%
235 6% 244 6%
Com m on Size Profit An
on Size Profit Analysis
XYZ CORP
(000's)

Review Review
KEY RATIOS 9/30/x9 Percent 9/30/x0

Working Capital $ 2,047 $ 2,167

Net Worth plus Sub Debt $ 2,151 $ 2,171
Current Ratio 14 x 12.6
Quick ratio 7.7 x 6.6
Receivables Days 50 days 46
Inventory Days 174 days 166
Payables days 9 days 16
Sales / Working Capital 1.73 x 1.78
Interest Cvg. (EBIT / Interest) 7.27 x 12.88
Debt / Equity 0.21 x 0.23
EBT/Tang. Net Worth 17% 20%
EBT / Total Assets 13% 15%
Sales / Fixed Assets 0 0
 Qualified
Percent 9/30/x1 Percent

$ 2,236
$ 2,312
x 11.8 x
x 5.5 x
days 46 days
days 176 days
days 12 days
x 1.82 x
x 10 x
x 0.2 x
11%
9%
0
XYZ CORP
(000's)

Review Review
Stmt of Retained Earnings 9/30/x9 Percent 9/30/x0 Percent

RETAINED EARNINGS - BEGINNING $ 1,618 $ 1,755

Net Income/(Loss) $ 189 $ 235

Dividends $ (52) $ (61)
Other Addns / (Reductions) $ - $ -

RETAINED EARNINGS - ENDING $ 1,755 $ 1,929

Qualified
9/30/x1 Percent

$ 1,929

$ 244
$ (56)
$ (32)

$ 2,085
RISK ASSESSMENT GRID
BUSINESS RISKS
INDUSTRY RISKS

GENERAL MODERATE MODERATELY

CHARACTERISTICS LOW RISK RISK HIGH RISK HIGH RISK
AND GOALS

Sales and profits

Sales and profits
moderately affected
Sales and profits not mildly affected by Highly cyclical or
by expansion and
affected by the expansion and countercyclical;
recession; a number
Industry business cycle; no recession; limited
of substitutes
many substitutes
substitutes available substitutes available easily accessible; no
available or
or likely or high switching switching costs
moderate switching
costs
costs

The firm's overall

strategy, if
The strategy is The firm has no clear
successfully Key competitors
reasonably clear and competitive strategy;
executed, will have similar strategy
affordable and management is not
Strategy for favorably set it apart and are better able
management is able focused and may be
from key to execute, due to
Competitive competitors; the firm
to carry it out, but it spending in areas
the superior
Advantage is not proven that not critical to the
has the management management
the strategy will firm's success;
expertise and expertise and
consistently defeat competitors are
financial capacity to financial capacity
the competition more focused
carry out the
strategy

Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

One of the largest in One of the smallest

Small in terms of
terms of sales, in terms of sales,
Size assets, profits, and
Average size sales, profits and
profits and market
market share
market share share

Emerging firm -
growing at explosive
Mature firm - Maturing firm - some Emerging firm -
rate. OR declining
Maturity growing at a shakeout of weaker growing at rapid, not
firm - sales and
reasonable rate competition explosive, rate
assets declining over
a number of years
 Company sells
Company sells many several product lines;
Company has limited
products; products products have
number of products
have multiple uses in limited flexibility of Company sells single
or lines with limited
many different use but are sold to product line or
flexibility of use; one
Diversification industries; no diverse customers;
product or product
multiple product
product line one product or lines to a single
line accounts for
accounts for 10% or product line customer
more than 30% of
more of company accounts for 20%-
sales or profits
sales and profits 30% of sales and
profits

Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

The firm has clear Some key goals are

goals that are Key goals are clear not clear or are
consistent with the and consistent with inconsistent with
overall strategy; the the strategy; the goal stated strategy; the
goal setting and setting and strategic planning and goal Goals are unclear or
Goals strategic planning planning process is setting process is not inconsistent with
process is well informal and may well developed and stated strategy
developed and not accommodate does not
accommodates all important accommodate
important and new information important and new
information information

Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

MANAGEMENT
Limited experience Limited experience
Extensive industry
Has experienced in the industry with in the industry
experience with
Experience wide range of
several industry minimal exposure to without exposure to
cycles normal industry normal industry
conditions
problems problems

More than one key

One key functional
Experienced One key function function without
manager somewhat
managers in place in without experienced experienced
Breadth all major functional
less experienced
manager; other managers; difficult
than desirable, but
areas managers covering for other managers
learning quickly
to cover
 Unusually high Adequate Insufficient
Insufficient
management depth management depth management depth
management depth
with succession in all with each critical with some outside
Depth functional areas function covered by recruiting necessary
and vacancies in key
spots causing serious
provided for at least one qualified to fill vacancies in
exposure
internally successor secondary positions

Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

MANAGEMENT

Managers recently
Established broad acquainted with
Managers known to
reputation for investors; no reason
Good reputation for investors; no reason
unwavering integrity to question
Integrity in positive as well as
integrity in local to question integrity,
management
business community but reputation not
adverse integrity, but
widely known
circumstances reputation is not
widely known

Active board Some outside

comprised of directors of
Advisors and Outside directors, if Inside board that
nationally recognized moderately
any, are not an does not discharge
Board of business leaders important stature
effective control on normal
Directors serves as a strong exercise average
management responsibilities
check on control over
management management

Track record of Rarely able to meet

Track Record and Long track record of Inconsistent record
meeting forecasts forecasts and goals;
meeting forecasts of meeting forecasts
Reliability and goals
and goals about half
and goals
some years are
the time better, some worse
Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

PRODUCT
MARKET MATCH

Deferrable necessity;
A staple; always in
demand cyclical; An extravagance;
demand; consistent A luxury; thin market
Importance and predictable
purchases can be
but stable demand
market thin and
delayed but not unstable
demand
deferred entirely
 Highly differentiated Some differentiation
product; few possible; comparable Nondifferentiable Nondifferentiable
comparable substitutes limited, product with a product with many
Product substitutes; strong perhaps by product number of readily comparable or better
Differentiation patent protection or complexity; some available substitutes; substitutes; no brand
consumer loyalty; brand loyalty and good quality loyalty or mediocre
excellent reputation good quality reputation product quality
for quality reputation

Changes in customer
Changes in customer
preference occur
preference are
The market is stable rapidly and randomly
Changes in customer common and
and changes in and are difficult to
preferences occur companies with
Market Stability customer
slowly and are easy good market
predict, even by
preferences occur companies with
to anticipate research can identify
slowly average or above
them in time to
average market
respond
insight

Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

SUPPLY
Price / Bargaining Substantial control No control, but Supplies subject to
Supplies subject to
of price supply supplier competition supplier price
Power sources ensures fair price influence
supplier price control

Changes in
Changes in Changes in
availability of
availability of availability of
Changes in supplies not
supplies reasonably supplies reasonably
availability of predictable with
Availability supplies highly
predictable; normal predictable, but
much lead time;
variations can be large enough to
predictable changes likely to
absorbed without cause major impact
cause significant
major impact on profits
variations in profits

Occasional instances Periodic instances of

Long record of Frequent oversupply
of oversupply that oversupply and
purchasing supplies or undersupply
Purchasing in appropriate
are absorbed undersupply causing
causing significant
without major some variations in
amounts variations in profits
impact on profits profits
Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

PRODUCTION
 Fairly frequent
Trouble free Occasional Constant unplanned
unplanned
operations; significant downtime production
disruptions in
downtime not or production disruption; heavy
Consistency disrupting problems; low to
production;
impact on costs;
moderate significant
production moderate impact on major cause of cost
impact on costs and
schedules or costs schedules and costs variations
deliveries

Keeps up-to-date
with technology
And industry leader Slow to adopt
changes; slow to Technology shifts
in using most current changes; vulnerable
Vulnerability to adopt new rapidly; company
technology; not to shifts in
technologies, but not highly vulnerable;
Technology likely to be caught
vulnerable to rapid
technology; would
major shifts could
off guard by changes not prove fatal
introduction of new prove fatal quickly
in technology immediately
technology that
would prove harmful

Moderately
Not vulnerable or vulnerable; large Catastrophes could
Vulnerability to large enough to enough to absorb have a major impact Catastrophes with
Catastrophes absorb all imaginable consequences but would not be professional
events without major fatal
impact on profits

Occasional strikes or
Occasional strikes of History of
work stoppages of
Long history of significant duration; acrimonious labor
brief duration; good
Labor Relations harmonious labor
working relationship
some unplanned or relations; strikes
relations unexpected work tend to be long and
between union and
stoppages bitter
management

Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

DISTRIBUTION
Reaches all qualified Reaches most Reaches some Severely limited; not
Reach and desirable qualified and qualified and reaching desirable
customers desirable customers desirable customers customers

Controls significant Sells to wholesalers

Cells to wholesalers
portion of or distributors who
Controls distribution or distributors who
distribution chain; carry limited number
down to customer; carry many
some opportunities of substitute
Control has complete control
to promote products products; minimal
substitute products;
over product no control over
in chain or to control over
promotion promotion or
influence purchasing promotion or
distribution
decisions distribution
 Can respond quickly Change in
and economically to Changes in Distribution changes distribution patterns
changes and distribution occur occur rapidly; could prove fatal to
distribution frequently but can management can the company;
Flexibility requirements; be anticipated; anticipate changes changes occur
changes can be changes have small most of the time; quickly; virtually
anticipated and to moderate impact errors costly but not impossible to
planned years in on profits fatal anticipate and
advance respond

Moody's
Analytics

BUSINESS
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

SALES

Faces some
competition and its Faces moderate Faces heavy direct
Faces no direct
primary markets; competition from competition from
Competition competition and it's
generally does better stronger, larger stronger, larger
primary markets
than its primary companies companies
competitors

Customers have
Substantial control
Significant influence Minimal influence significant control
Bargaining Power over sales price of its
over prices over prices over price of
primary products
company products

Substantial influence Customers have

Limited control over No control over
Demand of or control over
demand demand
significant control
product demand over demand

Diversified customer
Undiversified
base; one customer
customer base; sells
or industry group Moderately
to one or two
accounts for more diversified customer
Not affected by customers to
Concentration global competition
than 10% of sales; base; significant
account for 100% of
loss of such accounts dependence on a
sales; loss of
would have few customers
accounts would
temporary adverse
prove fatal
impact

Moody's
Analytics

INDUSTRY
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

Low operating High operating

Fixed costs
leverage: (1) low Balance of fixed and leverage:(1) high
Cost Structure fixed costs, (2) high variable costs
moderately higher
fixed costs, (2) low
than variable costs
variable costs variable co
 Consistently Consistent but lower Profitable during
Unprofitable during
profitable through than average expansions. Mildly
Profitability expansions and profitability during unprofitable during
expansions and
recessions
recess recessions recessions

Emerging industry –
still growing rapidly; Emerging industry
Maturing industry –
Mature industry – weak competitors end growing at
beyond major
sales and profits still just beginning to explosive rate. Or:
Maturity increasing at
growth problems
drop out. Or: highly declining industry
and shake out of
reasonable rate mature industry – any sales and profits
weak competitors
just on the verge of decreasing
decline

Moody's
Analytics

INDUSTRY
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK

Technology
Technology change is Technology change is
Technology is stable advancement is
gradual and has gradual and is
and has little impact rapid; products,
some impact on impacting several
on products, production
Technology production
other products, aspects of products,
processes, or
production production
processes, or business practices
processes, or processes, or
business practices are changing swiftly
business business practices
and substantially

Sales rise and fall Sales moderately

Not affected by mildly, reflecting affected by Highly cyclical or
Cyclicality business cycle expansion and expansion and countercyclical
recession recession

Customers or Customers or
suppliers limited to suppliers limited to a Highly dependent on
Highly diversified
several industries, few industries; some one or two other
Dependence customer or supplier
but none represent represent 20% to industries or
base
more than 10% of 30% of sales or customer groups
sales or purchases purchases

Global competition is
Able to source and very strong and
sell globally but Global competition is causing
Not affected by
Globalization global competition
relatively unaffected a factor in industry consolidations,
by global profitability failures, or new
competition business strategies in
the industry

Moody's
Analytics

INDUSTRY
LOW RISK MODERATE MODERATELY HIGH RISK
CHARACTERISTICS RISK HIGH RISK
 Variety of substitutes
Vulnerability to Few substitutes Many substitutes
No substitutes available, or
available, or high easily accessible; no
Substitutes available or likely
switching costs
moderate switching
switching costs
costs

Friendly regulatory
Regulations have Regulations have
environment Unregulated or
noticeable adverse significant chronic
Regulatory protects or enhances slightly regulated;
impact on revenues adverse impact on
industry health; regulatory changes
Environment change in highly unlikely or
or costs; predictable industry health;
and manageable regulation subject to
environment highly predictable
impact sudden change
predictable

Predicting and
Predicting and controlling business
Business activities
Business activities controlling business activities require
are very difficult to
are easy to predict activities requires special knowledge
predict or control
and control and are normal routines and and skill to avoid loss
and are dangerous to
not dangerous to care by managers and special
Operations employees; product and employees; employee
employees; even
small product
defects are not product defects are precautions to avoid
defects are
dangerous to an inconvenience danger; defects are
dangerous to
customers rather than a danger sometimes
customers
to customers dangerous to
customers
Moody's
Analytics