What is vertical analysis?
Vertical analysis is a method of financial statement analysis that calculates the assets, liabilities and equities as a percentage of the total. This makes it easy to compare balance sheets with income statements or the balance sheets and income statements of different baseness.
Where have you heard about vertical analysis?
Vertical analysis is a common investment technique. If you have ever looked at a company balance sheet or income statement, you may have noticed a column with percentage values in it – this is vertical analysis.
What you need to know about vertical analysis.
Vertical analysis is also known as common-size financial statements.
It is most commonly used on balance sheets and income statements. On a balance sheet, vertical analysis reports each line as a percentage of the total assets. On an income statement, vertical analysis reports each line as a percentage of gross sales.
By calculating a percentage that is proportional to the overall financial measure, whether that’s sales or assets, vertical analysis makes it easy to compare financial reports of different sized companies.