Vertical Analysis Income Statement Example

Salary paid to the workers of the company is 300000 office rent paid is 30000 utilities worth 40000 and other expenses are 60000.

Vertical analysis income statement example. As you see in the above example we do a thorough analysis of the income statement by seeing each line item as a proportion of revenue sales revenue sales revenue is the income received by a company from its sales of goods or the provision of services. A vertical analysis is used to show the relative sizes of the different accounts on a financial statement. 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. Example of the vertical analysis of the financial statement which shows the total in amount and percentage.

An example of the vertical analysis of balance sheet and income statement is given below. Comparative balance sheet with vertical analysis. In the above table it can be seen that the gross profit margin has remained fairly stable during the last two years while the operating margin has witnessed slight improvement in 2018 due to a decrease in sg a expense. Vertical analysis of colgate s income statement let us see the example of a vertical analysis of colgate s income statement.

In the below snapshot we have divided each income statement line item with net sales for the period. 550 000 1 139 500 100 48 3 2017. 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. For example when a vertical analysis is done on an income statement it will show the top line sales number as 100 and every other account will show as a percentage of the total sales number.

Where the total sales of company a are 1000000 and the cost of goods sold is 400000. This video walks you through how to calculate the numbers required for vertical analysis.