Chapter 16, Problem 2PA

To determine

Vertical Analysis

Vertical analysis is prepared to analyze the relationship among various financial statements with a particular base amount.

Formula:

$\text{Vertical analysis percentage }=\left(\frac{\text{Specific item}}{\text{Base}\text{amount}}\right)\times 100$

This analysis is otherwise called as common-size statement.

To prepare: Comparative income statement for the two-year period.

Given info: Income statement for the two year period.

To determine

Requirement 2:

To comment: Significant relationships revealed by the horizontal analysis.