Chapter 17, Problem 2DQ

To determine

Vertical Analysis: Vertical analysis is prepared to analyze the relationship among various financial statements with a particular base amount. Use the following formula to calculate vertical analysis percentage:

Formula:

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

This analysis is otherwise called as common-size statement or comparative statements.

Trend Analysis: Trend analysis is one form of horizontal analysis. It helps the user to know the changes that has been occurred for several years. When trend analysis is done, firstly certain value is taken as a base and further, other figures are matched to the proportion of the base figure.

Formula:

$\text{Trend}\text{percentage}\text{=}\left(\frac{\text{Any}\text{period}\text{amount}}{\text{Base}\text{period}\text{amount}}\right)$

To determine: the difference between comparative statements and trend analysis.