What is vertical analysis?

Answer 1

Vertical analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a proportion of the total account. In vertical analysis of financial statements, an item is used as a base value and all other accounts in the financial statement are compared to this base value. On the balance sheet, total assets equal 100% and each asset is stated as a percentage of total assets. Similarly, total liabilities and stockholder's equity are assigned 100%, with a given liability or equity account stated as a percentage of total liabilities and stockholder's equity. On the income statement, 100% is assigned to net sales, with all revenue and expense accounts then related to it. The main advantages of vertical analysis are that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy to see relative annual changes within one business.

fazlullah KPK AUP,PESHAWAR PAK