Income Statement Vertical Analysis Formula

A vertical analysis is used to show the relative sizes of the different accounts on a financial statement.

Income statement vertical analysis formula. Vertical analysis is the proportional analysis of a financial statement where each line item on a financial statement is listed as a percentage of another item. This means that every line item on an income statement is stated as a percentage of gross sales while every line item on a balance sheet is stated as a percentage of total assets. Mathematically it is represented as vertical analysis of income statement income statement item total sales 100. All the line items in a vertical analysis are compared with another line item on the same statement.

Percentage of base amount of individual item amount of base item 100 a basic vertical analysis needs an individual statement for a reporting period but comparative statements may be prepared to increase the usefulness of the analysis. The formula for vertical analysis of income statement can be derived by dividing any item in the income statement by the total sales and express it in terms of percentage. Accounting students department managers ceos finance students mba students accountants and executive mba students. In this video on vertical analysis formula here we discuss how to do vertical analysis of financial statements balance sheet income statement using its f.

Vertical analysis formula income statement income statement item total sales 100 vertical analysis formula balance sheet balance sheet item total assets liabilities 100 to increase the effectiveness of vertical analysis multiple year s statements or reports can be compared and comparative analysis of statements can be done. Vertical analysis on an income statement will show the sales number sometimes listed as revenue as 100 and every other account will show as a percentage of the total sales number. In a vertical analysis the percentage is computed by using the following formula.