After vertical analysis of a balance sheet,current assets have increased from 42% to 56%,this would always mean that:
A)current assets have increased as a percentage of total assets.
B)the dollar amount of total assets has increased.
C)the dollar amount of total assets has decreased.
D)the dollar amount of long-term assets has increased.

Question

Quizplus · Accepted Answer

Vertical analysis is a technique that expresses each financial statement item as a percentage of a base amount. In this case, the base amount is total assets. Therefore, if current assets have increased from 42% to 56%, it means that they represent a larger percentage of total assets. This indicates that the company has more resources available for short-term needs. The other options are not valid because they do not account for the vertical analysis technique.

After Vertical Analysis of a Balance Sheet,current Assets Have Increased