How To Prepare Vertical Income Statement

It is one of the three financial statements that business firms usually prepare.

How to prepare vertical income statement. Common size financial statement analysis which is also called a vertical analysis is just one technique that financial managers use to analyze their financial statements it is not another type of income statement but is a tool used to analyze the income statement. Both analyses involve comparing income statement accounts to each other in dollars and in percentages. In the below snapshot we have divided each income statement line item with net sales for the period between 2007 to 2015. To prepare an income statement generate a trial balance report calculate your revenue determine the cost of goods sold calculate the gross margin include operating expenses calculate your income include income taxes calculate net income and lastly finalize your income statement with business details and the reporting period.

The income statement is another name for the small business owner s profit and loss statement. Let us see the example of a vertical analysis of colgate s income statement. A good way to do some ratio and trend analysis work is to prepare both horizontal and vertical analyses of the income statement. In this video video you will learn how to build an income statement in excel with data for any company.

Vertical analysis of colgate s income statement. This video walks you through how to calculate the numbers required for vertical analysis. In the above vertical analysis example we can see that the income decreases from 1 st year to 2 nd year and the income increases to 18 in the 3 rd year. The income statement summarizes the.

The income statement summarizes the results of a firm. The others being the balance sheet and statement of cash flows. The cost of sales has been in the range of 41 44 historically.