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How can we implement common size reports using EXCEL?

First lets try to understand what the above question means. Common size report expresses value in percentage rather than absolute money unit like dollars, rupee, yen etc. So first thing why do we need the common sizing?. Consider the figure ‘Absolute value comparison’ below, we have sales and revenue figure of ‘Company A’ in dollars and company B in YEN.  Looking at the figure we would think that company B is more profitable. If you think logically you can not compare two different unit currency like DOLLAR and YEN directly. If you can some how bring them up to common platform and then compare, we would have better results. The best common platform is by comparing in percentages rather than absolute currency units. Comparison of finance using percentage rather than absolute values is termed as common sizing.

Figure: - Absolute value comparison

Now let’s discuss how we can express the above report in percentage. Sales figure are the base for revenue figure. So if we can express the revenue in terms of percentage of sales our comparison would be more genuine. Below are the steps to convert the same in to percentage:-

•  The first step is to copy paste the data of both company A and company B in a new area as shown in figure ‘Copy paste in new area’.

Figure: - Copy paste in new area

• As decided previously we need to calculate percentage of revenue taking sales as the base. So let’s take ‘Company A’ first, copy sales i.e. copy B2 column as shown in figure ‘Calculating percentage’ (step 1).
• Now select the copy pasted sales and revenue and click EDIT à PASTE SPECIAL, check Divide (Step 2 and Step 3) and click Ok.

Figure: - Calculating percentage

• Once you click OK you should see values as shown in below figure ‘Percentage calculation’.

Figure: - Percentage calculation

• Select the new value à right click à format cell à select percentage.  You should see the values now in percentage as shown in figure ‘Percentage display’.

Figure :- Percentage display

• Do the same thing for company B. Below figure ‘Common sizing report’ shows that company A has better profits than company B.

Figure: - Common sizing report

There are instances when we want to compare balance sheets and income statement of disparate model business. When we say disparate we mean it can be in terms of money (like dollar and yen), in terms of business models or size of the organization. Common sizing reports are the best way to arrive to a genuine decision in disparate financial comparison to arrive at business decisions.

Hard copy is hard copy.You can read it , experiment it , prepare notes and lot. So why read online samples when you can own a full copy for less than 4$ .Email [email protected]  to buy hard copy of the same. If you think the excel book can be improved please email the author at [email protected]
 

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