A financial statement item expressed as a percentage of a base amount is a result of:
A) horizontal analysis.
B) ratio analysis.
C) vertical analysis.
D) comparative analysis.

Question

Quizplus · Accepted Answer

Vertical analysis is the process of expressing a financial statement item as a percentage of a base amount, such as expressing each line item on the income statement as a percentage of total revenue or expressing each line item on the balance sheet as a percentage of total assets. Therefore, expressing a financial statement item as a percentage of a base amount is the result of vertical analysis. Horizontal analysis involves comparing financial statement data over a series of periods, while ratio analysis involves calculating and interpreting financial ratios. Comparative analysis is a broad term that could refer to any type of analysis that involves comparing financial statement data.

A Financial Statement Item Expressed as a Percentage of a Base