From the course: Corporate Financial Statement Analysis

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Common-size overview

Common-size overview

From the course: Corporate Financial Statement Analysis

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Common-size overview

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- [Instructor 1] Target had almost $9.5 billion in inventory, Walmart, 44 billion. Which company is more efficient in managing its inventory? Well, it's hard to tell just by looking at the raw numbers. - Step one in our financial ratio analysis is the DuPont framework, very elegant, very nice, dividing return on equity into profitability, efficiency, and leverage dimensions. - So let's go on to step two, common size financial statements, which, in my opinion, is such an efficient way to get more information out of the financial statements. - The basic insight is this: you can't compare companies of different size or scale issues. Walmart has over $500 billion in sales. Target has less than $100 billion in sales, but with the proper sequence of analysis steps, we can get right down to how many days each company has its inventory in its stores. That's a powerful number to know. - [Instructor 1] It is important to be…

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