Vertical Analysis definitions Flashcards
Vertical Analysis definitions
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Vertical Analysis
Financial statement evaluation method expressing each item as a percentage of a base amount within the same period. Base Amount
Reference figure used as the denominator in percentage calculations for financial statement analysis. Income Statement
Financial report summarizing revenues and expenses to show net income over a specific period. Net Sales
Total sales revenue after deducting returns, allowances, and discounts, serving as the base for income statement analysis. Balance Sheet
Financial statement presenting a company's assets, liabilities, and equity at a specific point in time. Total Assets
Sum of all resources owned by a company, used as a base for vertical analysis on the balance sheet. Total Liabilities and Equity
Combined value of obligations and owners' claims, equaling total assets on the balance sheet. Cost of Goods Sold
Direct costs attributable to the production of goods sold, often a major percentage of net sales. Gross Profit
Difference between net sales and cost of goods sold, representing earnings before operating expenses. Operating Expenses
Costs incurred through normal business operations, such as selling and administrative expenses. Depreciation Expense
Allocation of the cost of tangible assets over their useful lives, reducing taxable income. Income from Operations
Earnings generated from core business activities after deducting operating expenses from gross profit. Interest Expense
Cost incurred from borrowing funds, shown as a percentage of net sales in vertical analysis. Income Tax Expense
Amount owed to tax authorities based on taxable income, calculated as a percentage of net sales. Net Income
Final profit remaining after all expenses, taxes, and costs are deducted from total revenue.
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