Vertical analysis helps to identify significant changes that have taken place during the period and to determine whether the changes have favorable or unfavorable impacts on solvency and performance.

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Vertical analysis is a method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities, and equity) in a balance sheet is represented as a proportion of the total account. This technique helps in identifying significant changes over the period and assessing their impact on the company's solvency and performance by comparing the relative percentages of account balances year over year or against a benchmark.

Vertical Analysis Helps to Identify Significant Changes That Have Taken