Part 2 — Financial Statement Analysis

A common base on the same statement: income-statement items as a % of net sales (revenue), and balance-sheet items as a % of total assets. It standardizes statements so firms of different sizes can be compared.

Restates each item as a % of sales to reveal cost and margin structure and to compare profitability across periods or companies regardless of absolute size.

Comparison of a line item across multiple periods, expressing change as a dollar amount and/or percentage versus a prior period, to detect trends and growth rates over time.

Percentage change = (current-period amount − base-period amount) / base-period amount. A negative base-period amount makes the percentage uninterpretable.

Each item across years is divided by its value in a selected base year (set to 100), so all later years are expressed as an index relative to that base, highlighting cumulative growth.

Inflation distorts nominal dollar trends; mergers/acquisitions and divestitures break comparability; and changes in accounting policies or estimates can make periods non-comparable.