Vertical analysis will reveal the percentage of net sales consumed by salaries expense.

Question

Quizplus · Accepted Answer

Vertical analysis is a technique of financial analysis in which each line item in a financial statement is expressed as a percentage of a base amount. In the case of the income statement, the base amount is usually net sales or revenues. Therefore, if a company uses vertical analysis to analyze its income statement, it can determine the percentage of net sales consumed by salaries expense.

Vertical Analysis Will Reveal the Percentage of Net Sales Consumed