what does the percentages mean in vertical analysis?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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what does the percentages mean in vertical analysis?
Year 4 | % of Sales | Year 3 | % of Sales | |||
Assets | ||||||
Current Assets | ||||||
Cash | $ 40,000 | 6.67 | $ 36,000 | 6.67 | ||
Marketable Securities | 20000 | 3.33 | 6000 | 1.11 | ||
54000 | 9.00 | 46000 | 8.52 | |||
Inventories | 135000 | 22.50 | 143000 | 26.48 | ||
Prepaid Items | 25000 | 4.17 | 10000 | 1.85 | ||
Total Assets current | 274000 | 45.67 | 241000 | 44.63 | ||
Investments | 27000 | 4.50 | 20000 | 3.70 | ||
plant net | 270000 | 45.00 | 255000 | 47.22 | ||
Land | 29000 | 4.83 | 24000 | 4.44 | ||
Total Assets | $ 600,000 | 100.00 | $ 540,000 | 100.00 | ||
Liabilities and Stock equity | ||||||
Liabilities | ||||||
Current Liabilities | ||||||
Notes payable | $ 17,000 | 2.83 | $ 6,000 | 1.11 | ||
Accounts payable | 113800 | 18.97 | 100000 | 18.52 | ||
salaries payable | 21000 | 3.50 | 15000 | 2.78 | ||
Total current liabilities | 151800 | 25.30 | 121000 | 22.41 | ||
Noncurrent liabilities | ||||||
Bonds payable | 100000 | 16.67 | 100000 | 18.52 | ||
other | 32000 | 5.33 | 27000 | 5.00 | ||
total Non current liabilities | 132000 | 22.00 | 127000 | 23.52 | ||
Total Liabilities | 283800 | 47.30 | 248000 | 45.93 | ||
80000 | 13.33 | 80000 | 14.81 | |||
Common stock | 80000 | 13.33 | 80000 | 14.81 | ||
156200 | 26.03 | 132000 | 24.44 | |||
Total SE | 316200 | 52.70 | 292000 | 54.07 | ||
Total Liabilities and SE | $ 600,000 | 100.00 | $ 540,000 | 100.00 | ||
Revenues | ||||||
Net sales | $ 230,000 | 96.64 | $ 210,000 | 97.67 | ||
Other revenues | 8000 | 3.36 | 50000 | 23.26 | ||
Total revenues | 238000 | 100.00 | 215000 | 100.00 | ||
Expenses | ||||||
COGS | 120000 | 50.42 | 103000 | 47.91 | ||
Selling expenses | 55000 | 23.11 | 50000 | 23.26 | ||
Interest expense | 8000 | 3.36 | 7200 | 3.35 | ||
Interest tax expense | 23000 | 9.66 | 22000 | 10.23 | ||
Total expenses | 206000 | 86.55 | 182200 | 84.74 | ||
Net Income | 32000 | 13.45 | 32800 | 15.26 |
Expert Solution
Step 1: Introduction
Vertical analysis is also known as common-size analysis because it converts each line item on a financial statement into a percentage of a common base. This helps to highlight the relative size of each item and provides insights into trends and patterns.
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