Which of the following ratios would be computed automatically in performing vertical analysis of an income statement?
A)dividend payout ratio
B)earnings per share
C)return on sales
D)current ratio

Question

Quizplus · Accepted Answer

Vertical analysis involves expressing each item on the income statement as a percentage of net sales. Therefore, the ratio that would be computed automatically in performing vertical analysis of an income statement is return on sales (also known as net profit margin), which is derived by dividing net income by net sales and expressing it as a percentage. Dividend payout ratio, earnings per share, and current ratio are not relevant to vertical analysis as they are not expressed as a percentage of net sales.

Which of the Following Ratios Would Be Computed Automatically in Performing