A common-size financial statement is a financial statement that expresses each line item as a percentage of a base item. The purpose of creating common-size statements is to analyze and compare the relative proportions of different financial statement items, allowing for a more meaningful comparison of companies of different sizes or the same company over different periods.

Here's how you can create common-size statements for key financial statements:

Common-Size Income Statement:

• Each line item in the income statement is expressed as a percentage of total revenue or sales.
• Formula: (Line item / Total Revenue) * 100
• Gross Profit Margin = (Gross Profit / Total Revenue) * 100
• Operating Profit Margin = (Operating Profit / Total Revenue) * 100
• Net Profit Margin = (Net Profit / Total Revenue) * 100

Common-Size Balance Sheet:

• Each line item in the balance sheet is expressed as a percentage of total assets.
• Formula: (Line item / Total Assets) * 100
• Current Assets as a percentage of Total Assets = (Current Assets / Total Assets) * 100
• Total Liabilities as a percentage of Total Assets = (Total Liabilities / Total Assets) * 100
• Shareholders' Equity as a percentage of Total Assets = (Shareholders' Equity / Total Assets) * 100

Common-Size Cash Flow Statement:

• Each line item in the cash flow statement is expressed as a percentage of net cash provided by operating activities.
• Formula: (Line item / Net Cash from Operating Activities) * 100
• Cash Flow from Investing Activities as a percentage of Net Cash from Operating Activities = (Cash Flow from Investing Activities / Net Cash from Operating Activities) * 100
• Cash Flow from Financing Activities as a percentage of Net Cash from Operating Activities = (Cash Flow from Financing Activities / Net Cash from Operating Activities) * 100

Common-size statements help analysts and investors identify trends and make meaningful comparisons between companies or between different time periods for the same company. They are especially useful when comparing companies of different sizes or in different industries, as percentages allow for a standardized comparison.