Vertical Analysis
A vertical analysis allows management to identify areas on the financial statement that should be investigated by comparing results from the current period to those of previous periods.
What is a Vertical Analysis?
- Account value as a percentage of a base
- Income statement: base is sales
- Balance sheet: base is total assets or total liabilities and equity
- Identifies if certain account values have changed in a positive or negative way relative to base.
Vertical Analysis of an Income Statement
Vertical Analysis of a Balance Sheet
Example: Vertical Analysis
Perfect a vertical analysis of the current assets section of the balance sheet.
Example: Vertical Analysis
Using the income statement below, perform a vertical analysis for Operating Expenses.
