Vertical Analysis Of Income Statement Formula

In the below snapshot we have divided each income statement line item with net sales for the period between 2007 to 2015.

Vertical analysis of income statement formula. An example of the vertical analysis of balance sheet and income statement is given below. The cost of sales has been in the range of 41 44 historically. Comparative balance sheet with vertical analysis. 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.

By using horizontal analysis we can now clearly see that google s revenue gross profit and ebitda grew faster than apple s in every year except for 2015 and one ebita exception in 2018 with 2016 looking. 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. 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. We can perform horizontal analysis on the income statement by simply taking the percentage change for each line item year over year.

For example on the income statement if the base chosen is revenue then each line item would be expressed as a percentage of revenue. 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. Vertical analysis of colgate s income statement.