Common-size financial statements allow you to compare the financial statements of large companies with the financial statements of smaller companies, because you are comparing percentages instead of dollars. For example, a small retailer can compare her cost of goods sold (perhaps 78%) to a much larger retailer's cost of goods sold (perhaps 80%). Similarly, one company's inventory might be 33% (of total assets) while a competitor's might be 28%.
Common-size financial statements are related to a technique known as vertical analysis.
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