Going Fundamental: Common Size Ratio Analysis

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I’m back! Sorry for the long absence. I have just made the greatest investment in my life, finding the one.

So lets go back then where we were. If ever you are in a seminar about stock investing they could probably discuss some accounting stuff like the one above.

Common Size Ratio analysis is basically comparing one company to another by the percentages. The basic comparison will be the FS analysis express in ratios. This analysis primarily focuses on the Profit and Loss statement or also known as Income or Loss Statement.

For example Company A and B using basic data.

Looking at the two company only at the amounts one can say that Company A is better due to its higher sales but looking at percentages we now see the difference of the the two company. Company B is better than Company A in terms mark up and management of expenses thus though Company A and B ended up with the same profit Company B shows a better management of cost and better pricing or market penetration.  
Financial Freedom Advocate About the blogger

Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.

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