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Common size statement base year = 100

For this blog I will use data taken from the Polly Ester case study. The common size statement takes data from the income statement and the balance sheet and calculates movements from a starting (base) year. It does help to provide useful information that can be used when carrying out an analysis of the financial position of a company.

The common size statement (in this case indexing all financial data to a base year 2009) will be used to highlight those figures that show extreme movements, or simply those that are out of line with, say, activity.

 2009201020112012
Non-current assets100122.6139.2141.0
Investments10092.791.1135.0
Inventories100146.8166.5230.3
Trade and other receivables100126.3172.6226.8
Current assets100137.1160.0212.6
Bank overdraft100435.4103.71090.3
Trade and other payables100136.6197.5272.1
Current liabilities100184.5133.6333.7
Share capital100107.8116.6106.6
Long-term loans10075.6485.733.3
Revenues100117.9147.7173.6
Cost of sales100119.2164.6210.4
Profit before tax100102.890.2–7.1
Interest payable100185.9381.4657.8
Retail and distribution costs100120.9152.0184.0
Administration costs100114.0128.0177.2
Retail space (sq mtr)100122.2139.6153.4

Common size statement for Polly Ester Holdings plc

The common size statement above shows an increase in retail space over the period of 53.4%, while retail and distribution costs have increased by 84% and bank overdraft by a staggering 1,090.3%.

Inventories, trade receivables and payables have risen faster than the retail space or revenue income. In 2009/10 cost of sales has risen faster than revenue income and the gap has widened in the two subsequent. There is a decline in profit before tax over the period 2011/12 clearly caused by the above and a substantial increase in interest payable.

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