COMMON SIZE ANALYSIS Definition

COMMON SIZE ANALYSIS, as used in vertical analysis of financial statements, an item is used as a base value and all other accounts in the financial statement are compared to this base value. On the balance sheet, total assets equal 100% and each asset is stated as a percentage of total assets. Similarly, total liabilities and stockholders equity are assigned 100%, with a given liability or equity account stated as a percentage of total liabilities and stockholders equity. On the income statement, 100% is assigned to net sales, with all revenue and expense accounts then related to it in percentages. See COMMON SIZED PERCENTAGES.

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STEWARDSHIP is responsibility for taking good care of resources entrusted to one, e.g., boards of directors must show good stewardship towards the company for which they are a board member.

NEGATIVE WORKING CAPITAL is when current liabilities exceed current assets.

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