Class,
Common-size is a way to display financial statements where a selected figure is represented as a percentage. Common-size financial statements simplify the process of comparing between companies and identifying large changes in the financials. Rapid increases or decreases will be readily observable, such as a rapid drop in reported profits during one quarter or year (Furhmann, 2023).
After doing a common size analysis of The Gap, Inc for fiscal years ending January 28, 2022 and January 29, 2023, it is apparent that cash went up by 4% in 2023. Total current assets make up the most of assets at 40.55%. Operating leases make up the second largest amount of assets with 27.87%. Operating expenses decreased $399 million, or 0.2 percentage points as a percentage of net sales in fiscal 2022 compared with fiscal 2021 primarily due to a decrease in performance-based compensation and a gain of $83 million on sale of buildings (SEC, 2023).
The percentages give the business owners a better idea of what the breakdown is of the numbers on the balance sheet. This information can be used to examine liquidity ratios, compare profitability and margins, identify key trends and patterns, spot anomalies and more.
–Juliann
References:
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
