Which of the following is an example of vertical analysis?
A)Comparing gross profit across companies.
B)Comparing income statement items as a percentage of sales.
C)Comparing debt with industry averages.

Question

Quizplus · Accepted Answer

Vertical analysis involves comparing items on a financial statement as a percentage of a common base, such as sales or total assets. Comparing income statement items as a percentage of sales is an example of vertical analysis. Comparing gross profit across companies (A) is not an example of vertical analysis as it does not involve comparing items within a single financial statement. Comparing debt with industry averages (C) is not an example of vertical analysis as it does not involve breaking down items within a financial statement as a percentage of a common base.

Which of the Following Is an Example of Vertical Analysis