Income Statement Vertical Analysis Example

Example 1 consider the following example of an income statement of the xyz company.

Income statement vertical analysis example. Comparative balance sheet with vertical analysis. Define current ratio current ratio measures the company s ability to pay current liabilities from current assets. With this method of analysis of financial statements we will look up and down the income statement hence vertical analysis to see how every line item compares to revenue as a percentage. 550 000 1 139 500 100 48 3 2017.

Vertical analysis formula for the income statement and balance sheet are given below vertical analysis formula income statement income statement item total sales 100 vertical analysis formula balance sheet balance sheet item total assets liabilities 100. Let s see some examples of vertical analysis of an income statement to understand it better. Current assets divided by current liabilities. For example in the income statement shown below we have the total dollar amounts and the percentages which make up the vertical analysis.

Example of vertical analysis on an income statement with expenses one of the most common ways you can use vertical analysis is to understand how a company s expenses are affecting its overall net profit. Compute vertical analysis in an income statement for example goods of sale base period amount income x 100 vertical analysis percentage 5. Vertical analysis of income statement income statement item total sales 100 examples of vertical analysis of income statement with excel template let s take an example to understand the calculation in a better manner. The following chart shows a company s income statements with expenses for two years with the total dollar amounts and percentages.

This video walks you through how to calculate the numbers required for vertical analysis. Example of vertical analysis for example suppose xyz corporation has gross sales of 5 million and cost of goods sold of 1 million and general and administrative expenses of 2 million and a 25.