Do you want to do a simple financial analysis of your small business? If you do, then common size financial statement analysis is for you. It tells you a lot about your company and it couldn't be easier to do. You simply look at your income statement and state each line item as a percentage of sales. Then, look at your balance sheet and state each item as a percentage of total assets. Take a look at the link for an example.
Common size analysis, also called vertical analysis, is the perfect type of financial analysis for very small businesses or home business firms. For financial novices, this is a good place to start in analyzing your business firm.
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Good point – the present/future value of businesses is almost never calculated. I teach a class on this stuff and even the students cringe from doing this calculation i.e. students that have paid to learn it. Yet, it remains a very important component of cash flow calculations and risk management.
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