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The common size income statement shows each line of a standard income statement as a percentage of the total revenue (sales) of a business.
This free Excel calculator produces a common size income statement from standard information taken from the income statement of a business.
A common size income statement is one that has an additional column showing each monetary amount as a percentage of the total revenue of the business. The common size income statement is not required by Accounting Standards, and is used more as a management tool rather than a formal reporting document.
A common size balance sheet is one that has an additional column showing each monetary amount as a percentage of the total assets of the business. The common size balance sheet is not required by Accounting Standards, and is used more as a management tool rather than a formal reporting document.
The return on sales is the operating income of the business expressed as a percentage of the revenue. It is a measure of the level of true income a business generates on its sales. It is calculated by dividing operating income by revenue. Operating income is the same as earnings before interest and tax (EBIT), otherwise called profit before interest and tax (PBIT).
The interest coverage ratio measures the amount of earnings a business has to make interest payments. It is calculated by dividing the profit before interest and tax by the interest expense. It is sometimes called the interest cover ratio or simply interest coverage or interest cover.