If vertical analysis,using total assets as the base,shows that total liabilities have increased from 50% to 63%,this would always mean that:
A) the dollar amount of liabilities has increased
B) liabilities have increased as a percentage of total assets
C) the current ratio has decreased
D) the dollar amount of owners' equity has decreased

Question

Quizplus · Accepted Answer

Vertical analysis is a technique of analyzing the relationship between different items in the financial statements by expressing each item in percentage terms with a common base. Here, the base is total assets. The increase in liabilities from 50% to 63% indicates that liabilities have increased as a percentage of total assets. It does not provide information on the dollar amount of liabilities, the current ratio, or the dollar amount of owners' equity. Therefore, the best answer is B.

If Vertical Analysis,using Total Assets as the Base,shows That Total