Question

TF Qu. 13-4 Vertical analysis is the comparison of...

Vertical analysis is the comparison of a company's financial information over time.

True or False?

Answer 1

Answer—False

Vertical analysis does not shows Financial information over time. Vertical analysis of balance sheet or income statement is done for a particular year, Percentages are shown for every item as a percentage of some basis such as Sales in case of income statement analysis and Total asset value in case of Balance sheet analysis.

Trend analysis or Horizontal analysis is what shows Financial information over time.

.A vertical analysis is given below as an example to understand vertical analysis better.

Condensed Income Statement
Vertical Analysis
	Vertical Inc
	Dollars	Percent
Net sales	$ 1,936,000.00	100.00%
Cost of goods sold	$ 1,009,507.00	52.14%
Gross Profit	$      926,493.00	47.86%
Operating expenses	$      263,010.00	13.59%
Operating Income	$      663,483.00	34.27%
Other Expenses
Interest expense	$          7,988.00	0.41%
Income before Income Taxes	$      655,495.00	33.86%
Income tax expense	$        54,984.00	2.84%
Net Income/ (Loss)	$      600,511.00	31.02%