Which one of the following statements describes vertical analysis? Vertical analysis:
A)compares the financial statements of businesses engaged in similar activities.
B)examines the relationship between revenue and the gross and net profit figures.
C)calculates the growth or decline in key figures such as revenue over several accounting periods.
D)involves an analysis of each figure in the financial statements expressed as a percentage of a key figure such as revenue.

Question

Quizplus · Accepted Answer

Vertical analysis involves analyzing each line item in the financial statements as a percentage of a key figure, typically revenue. This allows for a comparison of the relative proportions of different categories of expense, assets, and liabilities from one year to the next or across multiple companies.

Which One of the Following Statements Describes Vertical Analysis? Vertical