Chapter 3, Problem 3.1C

Section 3.1    A common-size balance sheet expresses all accounts as a percentage of what?

Summary Introduction

To discuss:  On what percentage does the common-size balance sheet express all accounts.

Introduction:

A common size balance sheet allows for the relative level of every equity account to be analyzed quickly. It is utilized by both the internal and external analysts.

Explanation of Solution

The common size balance sheet makes it easier to compare statement as the firm grows. It finds all accounts as a percentage of total assets.

Conclusion

A common size balance sheet shows both the numerical value and the relative percentage for total liabilities, total assets and equity accounts.