Income Statement Vertical Analysis Interpretation

Vertical analysis formula individual item base amount 100 vertical analysis formula for the income statement and balance sheet are given below vertical analysis formula income statement income statement item total sales 100.
Income statement vertical analysis interpretation. Android application https play. A vertical analysis can be completed on both an income statement and a balance sheet. In the vertical analysis of financial statements the percentage is calculated by using the below formula. In accounting a vertical analysis is used to show the relative sizes of the different accounts on a financial statement.
All the line items in a vertical analysis are compared with another line item on the same statement. A vertical analysis is used to show the relative sizes of the different accounts on a financial statement. For example when a vertical analysis is done on an income statement it. Unlike horizontal analysis a vertical analysis is confined within one year or one vertical column of the balance sheet.
This video walks you through how to calculate the numbers required for vertical analysis. Vertical analysis also known as common size analysis is a popular method of financial statement analysis that shows each item on a statement as a percentage of a base figure within the statement. In the case of an income statement it is revenue net sales. To conduct a vertical analysis of balance sheet the total of assets and the total of liabilities and stockholders equity are generally used as base figures.
Vertical analysis of the income statement shows the revenue or sales number as 100 and all other line items as a percentage of sales. 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. So we only need one period of data to derived the percentages and completed the analysis. Thus line items on an income statement can be stated as a percentage of gross sales while line items on a balance sheet can be stated as a percentage of total assets or liabilities and vertical.