1.3 COMBINED COMMON-SIZE AND BASE YEAR ANALYSIS

Working with Financial Statements
COMBINED COMMON-SIZE AND BASE YEAR ANALYSIS

1. 1.3 COMBINED COMMON -SIZE AND BASE
YEAR ANALYSIS


MAKI, Inc.
Summary of Standardized Balance Sheet

Assets common-size CBY Combined
200620052006200520062005
0.60.670.50%0.90%1,0001,500cash
0003.906,500s.t inv.
11.1918.818.837,50031,500acc. Rece.
1.251.4830.824.761,50041,500Inv.
1.041.25048.3100,00081,000total C.A
0.971.155051.7100,00087,000F.A
12.35100.00%100.00%200,000168,000Total A.


Liabilities & Owner Equity
1.723%1.80%6,0003,000Acc.pay.
1.51.85.53.611,0006,000Notes pay.
0.91.0877.714,00013,000Accruals
1.21.4115.513.131,00022,000Total C.L
1.11.337.734.575,00058,000L.T Lia.
1.11.3353.247.6106,40080,000Total Lia.
117.77.713,00013,000Com.-sto.
0.91.0740.344.680,60075,000R.E
0.891.0646.252.493,60088,000Total EQ.
11.19100.00%100.00%200,000168,000Total L&E

2. Firstly: Common-Base Year Statement
Common-Base Year Financial Statements (Trend Analysis):
Select a base year and then express each item or account as a
percent of the base-year value of that item. This is useful for
picking up trends through time.
This statement is a useful way of standardizing financial
statements in this case is to choose a base year and then
express each item relative to the base year.
For example, from 2005 to 2006, MAKI inventory rose
from $ 41,500 to $ 61,500. If we pick 2005 as our base
year, then we set inventory equal to 1.48 for that year.
For the next year, we would calculate inventory relative
to the base year as (41,500/61,500) =0.67 in this case, we
could say inventory grew by about %81 during the year,
and so on for the other items.
We calculate common-base year by this formula:
Item by the common year/ Item base year =

Secondly: Combined common-size and Base Year
Analysis:
Combined Common-Size and Base (Year Analysis):
Express each item in base year as a percent of either
total assets or sales. Then, compare each subsequent
year’s common-size percent to the base-year percent
(abstracts from the growth in assets and sales).

3. MAKI's accounts receivable were % 18.8 or $ 31,500 of
total assets in 2005. In 2006, they had risen to 37,500,
which was %18.8 of total assets. If we do our analysis in
terms of dollars. Then the 2006 figure would be
$37,500/31,500 = 1.19, representing a %29 increase in
receivables. However, if we work with the common-size
statements, then the 2006 figure would be
18.8%/18.8%=1. This tells us accounts receivable, as
percentage of total assets, grew by zero. Roughly
speaking, what we see is that of 1.19 percent total
increase, about zero percent ( %1.19-0%) is attributed
simply a growth in total assets.
We calculate Combined Common-Size and Base Year
Assets by this formula:
= Common-size amount common year%/ Common-
size amount base year%.