Common Size Income Statement Example: A Real-World Case Study for Investors
A common size income statement example makes the concept concrete in a way that abstract definitions cannot. Take Apple's fiscal year 2024 results: $391 billion in revenue, $173 billion in gross profit, $119 billion in operating income, and $94 billion in net income. The raw numbers impress, but they tell you almost nothing about whether Apple is more or less efficient than Microsoft, or whether its margins have improved over five years. Convert those figures to percentages of revenue, and the picture changes completely.
Apple's common size income statement shows a gross margin of 44.2%, an operating margin of 30.4%, and a net margin of 24.1%. Now you can compare that directly against any competitor regardless of size, and you can track whether those percentages moved up or down across reporting periods.
Key Takeaways
- Apple's gross margin of 44.2% and net margin of 24.1% serve as a high-quality benchmark for the technology sector.
- Common size analysis reveals cost structure changes that raw dollar comparisons obscure entirely.
- Microsoft runs a higher operating margin than Apple despite lower gross margin, because it spends proportionally less on SG&A and hardware costs.
- Coca-Cola's common size income statement shows gross margin near 60%, reflecting a brand-driven business with minimal cost of goods.
- Year-over-year common size comparisons detect margin compression before it shows up in analyst downgrades.
- The ValueMarkers screener surfaces all three key margins for 6,000+ companies without requiring manual calculation.
The Apple Common Size Income Statement (FY2024)
Here is Apple's fiscal year 2024 income statement converted to common size format, with each figure expressed as a percentage of $391 billion in net sales:
| Line Item | Dollar Amount (B) | % of Net Revenue |
|---|---|---|
| Net Revenue | $391.0 | 100.0% |
| Cost of Sales | $218.0 | 55.8% |
| Gross Profit | $173.0 | 44.2% |
| R&D Expense | $29.9 | 7.6% |
| SG&A Expense | $24.0 | 6.1% |
| Total Operating Expenses | $53.9 | 13.8% |
| Operating Income | $119.1 | 30.4% |
| Other Income (Net) | $1.2 | 0.3% |
| Pre-Tax Income | $120.3 | 30.8% |
| Income Tax | $26.4 | 6.8% |
| Net Income | $93.7 | 24.0% |
The 44.2% gross margin is Apple's most important structural number. It reflects the premium pricing of iPhone, Mac, and services products combined with a supply chain that has been relentlessly optimized over two decades. The 30.4% operating margin shows tight cost discipline: Apple spends only 13.8% of revenue on all operating costs combined, despite running one of the world's largest research programs.
Comparing Apple and Microsoft on a Common Size Basis
The power of the format appears when you put two companies side by side. Apple and Microsoft both operate in technology, both generate exceptional margins, but their cost structures differ in ways that raw dollar comparisons hide.
| Line Item | Apple (% Rev) | Microsoft (% Rev) |
|---|---|---|
| Revenue | 100.0% | 100.0% |
| Cost of Revenue | 55.8% | 33.1% |
| Gross Margin | 44.2% | 66.9% |
| R&D | 7.6% | 13.1% |
| SG&A | 6.1% | 8.3% |
| Operating Margin | 30.4% | 45.5% |
| Net Margin | 24.1% | 35.2% |
Microsoft's gross margin of 66.9% is substantially higher than Apple's 44.2%, driven by the software and cloud mix. Azure, Microsoft 365, and LinkedIn carry near-zero marginal cost per additional user, whereas Apple must manufacture physical devices at real cost. Microsoft spends more on R&D (13.1% vs 7.6%), but its operating efficiency is so high that it still delivers 45.5% operating margin versus Apple's 30.4%.
Neither profile is "better" in isolation. Apple's ROIC runs around 45.1% despite the lower operating margin, because it generates enormous cash flow relative to the capital it deploys. Microsoft's ROIC sits around 35.2%. Both are exceptional. The common size comparison shows where each company's structural advantages live.
What Five Years of Common Size Data Reveals About Apple
A single period common size statement is a snapshot. The real insight comes from running five years side by side.
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 |
|---|---|---|---|---|---|
| Gross Margin | 38.2% | 41.8% | 43.3% | 44.1% | 44.2% |
| Operating Margin | 24.1% | 29.8% | 30.3% | 29.8% | 30.4% |
| Net Margin | 20.9% | 25.9% | 25.3% | 25.3% | 24.0% |
| R&D % of Revenue | 7.2% | 6.7% | 6.3% | 7.7% | 7.6% |
The trend is clear. Apple expanded gross margin by six percentage points between FY2020 and FY2024, primarily by growing its services segment (App Store, Apple Music, iCloud), which carries gross margins above 70%. Operating margin grew in parallel and has stabilized near 30%. Net margin dipped slightly in FY2024 due to a higher effective tax rate, not an operating problem. The common size view catches that nuance immediately.
Adding Coca-Cola for a Cross-Sector Comparison
Common size analysis becomes even more revealing when you cross sector boundaries deliberately. Coca-Cola (KO) is not a technology company, but its common size income statement shows one of the widest gross margins in consumer staples.
| Line Item | Apple (% Rev) | Microsoft (% Rev) | Coca-Cola (% Rev) |
|---|---|---|---|
| Gross Margin | 44.2% | 66.9% | 59.8% |
| Operating Expenses | 13.8% | 21.4% | 36.4% |
| Operating Margin | 30.4% | 45.5% | 23.4% |
| Net Margin | 24.0% | 35.2% | 22.4% |
Coca-Cola's 59.8% gross margin reflects a brand that allows premium pricing on a product with low manufacturing cost. But it runs higher operating expenses (36.4% of revenue) because it spends heavily on advertising, bottling partnerships, and distribution. The result is an operating margin of 23.4%, lower than both Apple and Microsoft.
The P/E comparison is equally instructive: Coca-Cola trades at a P/E near 23.7, Apple near 28.3, and Microsoft near 32.1. The market prices Microsoft's higher margins at a premium, which the common size data justifies.
How to Spot Margin Compression Before It Becomes a Crisis
Margin compression is one of the most reliable leading indicators of business deterioration. Common size analysis catches it early. The pattern looks like this:
Revenue grows 10% year over year in dollar terms, which looks healthy. But cost of goods sold grows 14%, so gross margin compresses from 45% to 42%. Management talks about revenue growth in the earnings call without flagging the margin drop. The stock holds up for one or two quarters.
By the third quarter, operating margin has also compressed because SG&A grew at 12% while revenue grew at 10%. Net margin drops from 22% to 18%. Now analysts start downgrading. The common size reader spotted the gross margin compression two quarters earlier.
This is exactly how to use annual and quarterly common size income statements together: annual for the structural view, quarterly for the early warning system.
Using ValueMarkers to Run Common Size Analysis at Scale
Building common size income statements manually for 10, 20, or 50 companies is time-consuming. The ValueMarkers screener surfaces gross margin, operating margin, and net margin for every public company in its database, updated after each earnings report. You can filter for companies with gross margin above 50%, operating margin above 20%, and net margin above 15% in under 60 seconds.
The VMCI Score, which ValueMarkers calculates for each stock, weights Quality at 30% of the total score. A company maintaining stable or expanding net margins across five years scores near the top of the Quality pillar. Apple's VMCI Quality contribution is high not just because its current margins are strong, but because they have expanded consistently without a single year of meaningful compression.
For a complete margin analysis on any stock you follow, the screener gives you all three income statement margins alongside ROE, ROA, and ROIC in one view.
Further reading: SEC EDGAR · FRED Economic Data
Why vertical analysis example Matters
This section anchors the discussion on vertical analysis example. The detailed treatment, formula, and worked examples appear in the body of this article above. The points below summarize the most important takeaways for value investors who want to apply vertical analysis example in real portfolio decisions. ValueMarkers exposes the underlying data on every covered ticker via the screener and stock profile pages, so the concepts in this article translate directly into actionable filters.
Key inputs for vertical analysis example
See the main discussion of vertical analysis example in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using vertical analysis example alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.
Sector benchmarks for vertical analysis example
See the main discussion of vertical analysis example in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using vertical analysis example alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.
Related ValueMarkers Resources
- Roe — Glossary entry for Roe
- Roa — Glossary entry for Roa
- Operating Margin — Operating Margin is the metric used to how efficiently a company converts capital into earnings
- Income Statement Explained — related ValueMarkers analysis
- How To Read An Income Statement — related ValueMarkers analysis
- Mstr Stock Valuation Reassessment — related ValueMarkers analysis
Frequently Asked Questions
is operating income the same as ebit
Operating income and EBIT (Earnings Before Interest and Taxes) are the same figure for most companies. Both represent revenue minus operating expenses, before interest expense and income taxes are deducted. The distinction appears in rare cases where a company has significant non-operating income or expenses that some analysts include in EBIT but exclude from reported operating income. For the vast majority of publicly traded companies, you can treat the two terms as interchangeable.
how to common size a balance sheet
To common size a balance sheet, divide every line item by total assets rather than by revenue. Total assets become 100%, and every other line (cash, receivables, PP&E, debt, equity) appears as a percentage of that base. This lets you compare capital structure and asset efficiency across companies of different sizes. A company with 60% of total assets financed by equity and 40% by debt shows a conservative capital structure at a glance, regardless of whether total assets are $1 billion or $100 billion.
is ebit the same as operating income
For most companies, yes. EBIT equals operating income when there are no material non-operating items included in the EBIT calculation. Some analysts define EBIT to include interest income earned (since it comes before the interest expense deduction), while reported operating income may exclude it. Check the company's income statement carefully. In common size analysis, use whichever figure the company reports as its standard operating line, and apply it consistently across all periods you are comparing.
how to invest 10k for passive income
Ten thousand dollars invested for passive income works best in dividend-paying blue-chip stocks with a long track record. Johnson & Johnson (JNJ) yields approximately 3.1%, Coca-Cola (KO) yields approximately 3.0%, both with 50+ year dividend growth streaks. At $10,000 invested equally between the two, you would generate roughly $305 per year in dividends. Growth in that passive income depends on the dividend growth rate, which for KO has averaged about 5% per year over the past decade. Compound that over 20 years and the yield-on-cost climbs significantly.
what is common stock valuation
Common stock valuation is the process of estimating what a share of a company is worth, independent of its current market price. The most rigorous methods are discounted cash flow (DCF), which values the company based on its projected future free cash flow; price-to-earnings comparison against peers and historical averages; and price-to-book for asset-heavy businesses. ValueMarkers' DCF calculator runs four valuation models simultaneously so you can triangulate intrinsic value rather than relying on any single method.
how to calculate current ratio from financial statement
The current ratio equals current assets divided by current liabilities, both drawn from the balance sheet (not the income statement). Current assets include cash, accounts receivable, and inventory. Current liabilities include accounts payable, short-term debt, and accrued expenses. A current ratio above 1.5 generally indicates the company can meet near-term obligations comfortably. Berkshire Hathaway (BRK.B) consistently runs a current ratio well above 1.5, reflecting its fortress balance sheet and Warren Buffett's preference for financial conservatism.
Screen any stock's gross margin, operating margin, and net margin against sector peers in seconds at ValueMarkers Screener, where 120+ indicators are pre-calculated for every company in the database.
Written by Javier Sanz, Founder of ValueMarkers. Last updated April 2026.
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