In performing a vertical analysis, the base for sales revenue on the income statement is
A) net sales.
B) sales revenue.
C) net income.
D) cost of goods available for sale.

Question

Quizplus · Accepted Answer

Net sales is the most appropriate base for vertical analysis of the income statement as it represents the total revenue generated by the company from its sales activities after adjusting for sales returns and discounts. Using sales revenue as the base may result in overstated figures as it includes the full amount of sales before any adjustments are made. Net income and cost of goods available for sale are not appropriate bases for vertical analysis of the income statement.

In Performing a Vertical Analysis, the Base for Sales Revenue