To do that, we'll create a "common size income statement" and perform a vertical analysis. For each account on the income statement, we divide the given number by the company's sales for that year.

When you use total assets in the denominator, look at each balance sheet item as a percentage of total assets. For example, if total assets equal $500,000 and receivables are $75,000, receivables ...

Common size balance sheets are similar to common size income statements. The only difference is that each line item on this accounting balance sheet is expressed as a percentage of total assets.

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To do that, we'll create a "common size income statement" and perform a vertical analysis. For each account on the income statement, we divide the given number by the company's sales for that year.