Select the correct statement regarding vertical analysis.
A)Vertical analysis of the income statement involves showing each item as a percentage of sales.
B)Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets.
C)Vertical analysis examines two or more items from the financial statements of one accounting period.
D)All of these answer choices are correct.

Question

Quizplus · Accepted Answer

Vertical analysis involves expressing each item in the financial statements as a percentage of a base figure. For the income statement, this is typically sales, and for the balance sheet, it is total assets. Therefore, both A and B are correct, making D the correct choice. C is incorrect as it describes horizontal analysis, not vertical analysis.

Select the Correct Statement Regarding Vertical Analysis