Comparing each item in a financial statement with a total amount from the same statement is useful in analyzing relationships within the financial statement. Vertical Analysis is the term used to describe such comparisons.
In vertical analysis of a balance sheet, each asset item is stated as a percent of the total assets. Each liability and stockholders’ equity item is stated as a percent of total liabilities and stockholders’ equity. In vertical analysis of an income statement, each item is stated as a percent of revenues or fees earned.
Vertical analysis is also useful for analyzing changes in financial statements over time.
Required:
Choose a company that has their Balance Sheet available online and make a vertical analysis comparison. If you have already chosen a company to do your annual report project on then use their financial statements. Make sure you analyze at least five different accounts.
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