Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Vertical Analysis

Financial Accounting

14. Financial Statement Analysis

Vertical Analysis

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Multiple Choice

Vertical analysis is also commonly known as:

Ratio analysis

Trend analysis

Horizontal analysis

Common-size analysis

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Verified step by step guidance

Understand the concept of vertical analysis: Vertical analysis is a method of financial statement analysis where each item on a financial statement is expressed as a percentage of a base amount. For example, on an income statement, each line item might be expressed as a percentage of total sales.

Recognize the alternative name for vertical analysis: Vertical analysis is commonly referred to as 'common-size analysis' because it standardizes financial data, making it easier to compare across companies or time periods.

Differentiate vertical analysis from other types of analysis: Vertical analysis is distinct from horizontal analysis (which compares financial data across different periods) and ratio analysis (which uses financial ratios to evaluate performance).

Understand the purpose of common-size analysis: The goal of common-size analysis is to identify trends and relationships within financial statements by converting absolute figures into percentages, which can highlight areas of concern or strength.

Apply the concept: When performing vertical analysis, calculate the percentage of each financial statement item relative to a base amount using the formula: