COMMON-SIZE STATEMENTS
The development of common size statements evolved to confront the problem of comparing the financial statements of different sized firms. Common-size statements help to bring the financial statements of diverse size to a common-size format, which facilitates their comparison. This statement results from expressing the financial statements data in terms of percent to total. The percentage analysis is used to show the relationship of each component to the total of the balance sheet within a single statement. In this analysis of the balance sheet, each asset item is stated as a percent of the total assets. Each liability and stockholders' equity item is stated as a percent of the total liabilities and stockholders' equity.
Common size statements are used to analyze components and their proportion within an individual statement; however their use is limited. They are more frequently used and are significant for comparison between firms.
Following are the common size balance sheets of Infosys for the year 2005-06 and 2006-07:
(Amount in Rs. in Crore)
|
|
2005-06
|
%
|
2006-2007
|
%
|
|
Assets
|
|
|
|
|
|
Current Assets
|
6,049
|
66
|
8,961
|
69
|
|
Fixed Assets
|
2,133
|
23
|
3,107
|
24
|
|
Investments
|
876
|
10
|
839
|
6.4
|
|
Differed Tax Assets
|
56
|
1
|
79
|
0.6
|
|
|
9,114
|
100
|
12,986
|
100
|
|
Liabilities & Equity
|
|
|
|
|
|
Stakeholders' Equity
|
6,897
|
76
|
11,162
|
86
|
|
Current Liabilities
|
808
|
9
|
1,162
|
9
|
|
Provisions
|
1,409
|
15
|
662
|
5
|
|
|
9,114
|
100
|
12,986
|
100
|
The composition of Infosys assets slightly shifted from investments to current assets. Not much change is there in fixed assets. Net worth of the company increased and the provsions decreased. The main conclusion to be drawn from this analysis of Infosys is that current assets and current liabilities make up a large portion of the company and that the company's financial structure has no long-term liabilities.
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