Which of the following will vertical analysis allow managers to readily identify?
A)Sales are increasing at a faster rate than selling expenses
B)The percentage change in sales from the prior year
C)Sales are growing at a faster rate than assets
D)Income taxes are a larger percentage of sales in the current year compared to a previous year

Question

Quizplus · Accepted Answer

Vertical analysis involves expressing each line item on the financial statements as a percentage of a base amount. This allows managers to compare the relative proportions of different items within a single period or across multiple periods. Option D identifies the percentage of income taxes as it relates to sales, which can provide insight into changes in tax rates or profits. Options A, B, and C all relate to changes in absolute amounts, but not their relative proportions, which may not be readily apparent through vertical analysis alone.

Which of the Following Will Vertical Analysis Allow Managers to Readily