Vertical Trend Analysis Income Statement

Figure 13 1 income statement trend analysis for shows that net sales increased by 4 129 000 000 or 13 3 percent.

Vertical trend analysis income statement. In other words it indicates the relative size of each line item of the income statement of the subject company. Implementing vertical analysis vertical analysis restates each amount in the income statement as a percentage of sales. Here each line item on the income statement is expressed as a percentage of sales revenue and each line item on the balance sheet is expressed as a percentage of total assets. This video walks you through how to calculate the numbers required for vertical analysis.

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. Horizontal analysis also known as trend analysis is a financial statement analysis technique that shows changes in the amounts of corresponding financial statement items over a period of time. The increase in net sales. Vertical analysis refers to the analysis of the income statement where all the line item which are present in company s income statement are listed as a percentage of the sales within such statement and thus helps in analyzing the company s performance by highlighting that whether it is showing upward or downward trend.

Vertical analysis is the method of analysis of financial statements where each line item is listed as a percentage of another item to conduct useful decision making. Vertical analysis formula for the income statement and balance sheet are given below vertical analysis formula income statement income statement item total sales 100 vertical analysis formula balance sheet balance sheet item total assets liabilities 100. It is a useful tool to evaluate the trend situations. 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.

Cost of goods sold had a corresponding increase of 1 605 000 000 or 14 5 percent. The statements for two or more periods are used in horizontal 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.