Vertical Analysis Income Statement Formula

Comparative balance sheet with vertical analysis.
Vertical analysis income statement formula. Vertical analysis for an income statement when performing a vertical analysis of an income. For example on the income statement if the base chosen is revenue then each line item would be expressed as a percentage of revenue. 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. In the below snapshot we have divided each income statement line item with net sales for the period between 2007 to 2015.
If analysis reveals any unexpected differences in income statement accounts management and accounting staff at the company should isolate the reasons and take. Then it is compared to similar periods such as the first quarter of 2011 the first quarter of 2012 the first quarter of 2013 etc. 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. Let us see the example of a vertical analysis of colgate s income statement.
If revenue for the period is 60 000 and sales and marketing expenses are 8 000 then the line item percentage for sales and marketing expenses is given by the vertical analysis formula as follows. Have remained quite stable during the last three years. An example of the vertical analysis of balance sheet and income statement is given below. Vertical analysis of colgate s income statement.
A vertical analysis is performed for a specific period such as a month quarter year etc. Vertical analysis of income statement income statement item total sales 100 similarly calculate for the years 2017 and 2016 in the above table it can be seen that the gross profit margin operating income margin and net income margin of apple inc.