Vertical analysis of a balance sheet usually:
A) calculates each balance sheet item as a percentage of sales.
B) calculates each balance sheet item as a percentage of total assets (funds).
C) calculates each balance sheet item as a percentage of the bank balance.
D) calculates each balance sheet item as a percentage of share capital.

Question

Quizplus · Accepted Answer

Vertical analysis of a balance sheet calculates each balance sheet item as a percentage of total assets, which allows for an understanding of the composition of assets and the relative importance of each item. This analysis can provide insight into the financial health and stability of a company, as well as its ability to meet its obligations. Options A, C, and D are incorrect as they do not accurately describe vertical analysis of a balance sheet.

Vertical Analysis of a Balance Sheet Usually