So here is the idea behind common sizing, is that we want to be able to
compare a company like Dell to that of IBM, or
a company like Nike to that of Under Armour, right?
In the case of Nike and Under Armour, Nike is a much,
much larger company than Under Armour.
So, ordinarily, we wouldn't be able to compare them,
that is, the revenue of Under Armour is a fraction of that of Nike.
And so, if we were to say,
they've got $8 billion in revenue, it doesn't even compare to Nike.
But what we can do is we can manipulate these financials to show common size.
That is, the revenue as a percentage, cost as a percentage,
depreciation as a percentage, gross margin as a percentage.
And then regardless of what company we are looking at,
whether it's large or small, we can compare the percentages.
Okay, COGS is 12% of this company, but 28% of this company, right?
Depreciation is 3% over here, but 14% over there.
And then what we can do is try to understand,
what are the financial differences of organizations, and how does that
match up with the differences in how they're setting their goals?
How they're trying to complete their goals,
what are their operational strategies?
So, try to find best practices within the financials.
So, is it more profitable to have COGS at one level and
depreciation in another level or research and development at a different level?
So, here's what we're going to do.
There's a spreadsheet here, and there's a tab that's called Common size financials
for Dell, and I've imported, let's say the balance sheet for Dell in this example.
We're going to do the same thing for Nike in a moment, okay?
So when you pull up your tab as we have here, I'll give you a moment to do that.