Image source: Securities and Exchange Commission. The following table, which is part of a valuation analysis that Hanover Foods Corporation filed with the SEC, shows that, in addition to facilitating comparisons between companies, the common size income statement is also useful for comparing a single company's performance over time: The common size income statement is a very powerful tool.
You can start to see why analysts often use what is known as a common size income statement (link opens PDF), in which every item on the income statement is expressed as a percentage of total revenues. In fact, when we think of profitability, one of the first notions that comes to mind is that of profit margin, which is nothing other than that dollar amount of profits expressed as a percentage of total revenue:
FIGURING PERCENTAGES HOW TO
How to calculate percentages of total revenues Scaling each company's operating profits to its revenue allows us to make a better like-for-like comparison with regard to company profitability. We understand immediately that the difference between the two dollar amounts owes more to the difference in size between the two companies than to their profitability, per se. Observing the difference in magnitude between the two numbers is not altogether uninteresting, but you're bound to feel that such an analysis is incomplete. I guess that settles the matter of who is more profitable." On seeing those figures, you might conclude your analysis with the following observation: "Apple's operating profit exceeds that of Fitbit by a factor of 229 (= $71,230/ $310.7).
30, 2015, Fitbit generated an operating income of $310.7 million.
Rule of three to calculate the percentage of an unknown quantity knowing another percentage of the quantity
What percentage of 250 does 50 represent?Ģ50 is the 100% and 50 is the percentage that we do not know, X :ĥ0 is 20% of 250. Rule of three to calculate the percentage represented as a quantity of another If 25% is 49 then the 100%, which we do not know, will be X : Rule of three to calculate a quantity knowing the percentage of itįor example, we know that 25% of a quantity is 49. So the approach would be: if I have 30 from 100, I have X from 360: Rule of three to calculate the percentage of a numberįor example, we want to calculate 30% of 360.ģ0% means 30 for each 100. Today we are going to use the rule of three to solve different types of problems related to percentages. In earlier posts, we have learned what a percent is and how to calculate it.