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# Perform a vertical analysis of financial statements

Perform a vertical analysis of financial statements

1) A vertical analysis differs from a horizontal analysis in that an item is selected as the base amount and all other items are computed as a percentage of the base amount.

2) The base amounts for a vertical analysis are net income and total equity.

3) Net sales at Kelly&#39;s Bakery increased from \$40,000 to \$60,000 and its cost of goods sold increased from \$20,000 to \$40,000, then vertical analysis based on net sales would show the following percentages for cost of goods sold (rounded to the nearest percent):

A) 40% and 20%.

B) 10% and 30%.

C) 50% and 67%.

D) 67% and 40%.

E) 33% and 50%

4) For vertical analysis purposes, the base item on the balance sheet is __________.

5) For vertical analysis purposes, the base item on the income statement is __________.

6) If Rick&#39;s net sales increased from \$40,000 to \$80,000 and its operating expenses increased from \$30,000 to \$50,000, then, using vertical analysis based on net sales, what percentages would show for  operating expenses for the two periods (to the nearest tenth of a percent)?

Dec 26 2019 View more View Less Get Solution