Chapter 9, Problem 1SEQ

What type of analysis is indicated by the following?

To determine

Concept Introduction:

Vertical Analysis:

Vertical Analysis is used to analyze the % of items in statement for a particular period as the % of total amount. Vertical Analysis is done for particular period for different items. For example, analysis of '% of assets' as '% of Total assets' for a particular year is done using the Vertical analysis.

To Choose:

The option that states the type of analysis.

Answer to Problem 1SEQ

A. Vertical Analysis

Explanation of Solution

Explanation for correct answer:

The given analysis is a vertical analysis. Hence, correct option is A.

Explanation for incorrect answers:

B. Horizontal analysis analyzes each row of the statement unlike the vertical analysis. Hence, it is not the correct option.

C. Profitability analysis analyzes only the profits and not the balance sheet items. Hence, it is not the correct option.

D. Contribution margin analysis does not apply to the balance sheet items. Hence, it is not the correct option.