Common Size and Trend Analysis

Three years of a growing business look like three columns of rising numbers. Restate every line as a percentage and the same three columns tell you whether the growth was worth having.

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Six things you will be able to do

Go past reading down a column. Learn to restate statements so three years can be compared at a glance.

01 Common size the income statementEvery line as a percentage of revenue, so scale stops getting in the way.
02 Common size the balance sheetEvery line as a percentage of total assets, and what the shift reveals.
03 Build a trend indexRebase every line to year one and watch which ones outrun revenue.
04 Separate growth from mixWhether a margin moved because of pricing, cost, or what was sold.
05 Strip out the noiseOne offs, restatements and changed year ends, removed before comparing anything.
06 Write the two line findingSay what moved, by how much, and what it implies about the business.
The outcome

What changes after this course

You stop reading three columns of rising numbers and start seeing which lines moved, in which direction, relative to everything else.

%

Three years of statements restated so they can actually be compared

The lines that moved identified, separated from the ones that merely grew

A short written finding stating what changed and what it implies

What our learners say

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