A vertical analysis is primarily concerned with:
A) the dollar amount of the change in various financial statement amounts from year to year.
B) individual financial statement items expressed as a percentage of a base (which represents 100%).
C) percentage changes in the balances shown in comparative financial statements.
D) the change in key financial statement ratios over a specified period of time.

Question

Quizplus · Accepted Answer

A vertical analysis compares each financial statement item to a base amount (which represents 100% of that item), expressing it as a percentage. This helps in understanding how each item contributes to the overall performance of the company and in identifying trends and changes over time. Option A and C are more related to horizontal analysis, which compares financial statement amounts between different periods. Option D is not directly related to either vertical or horizontal analysis, but rather focuses on the change in financial ratios over a period of time.

A Vertical Analysis Is Primarily Concerned With