1. What is Vertical Analysis of Income Statement?

Definition: Vertical analysis is a financial statement analysis technique where each line item is shown as a percentage of a base figure (typically total revenue).

Purpose: It helps compare financial statements across different periods or companies by showing relative proportions of each item.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( \%I \) — Percentage of item (%)
• \( I \) — Item amount (currency, e.g., USD)
• \( T \) — Total revenue (currency, e.g., USD)

Explanation: Each income statement item is divided by total revenue and multiplied by 100 to express it as a percentage.

3. Importance of Vertical Analysis

Details: Helps identify trends, compare companies of different sizes, and understand cost structures relative to revenue.

4. Using the Calculator

Tips: Enter the item amount and total revenue in USD. Total revenue must be > 0 for calculation.

5. Frequently Asked Questions (FAQ)

Q1: What items can I analyze with this?
A: Any income statement line item - COGS, operating expenses, net income, etc.

Q2: Why use percentages instead of absolute numbers?
A: Percentages allow comparison across companies of different sizes and over time.

Q3: What's a good percentage for expenses?
A: Varies by industry, but lower percentages generally indicate better efficiency.

Q4: Can I use this for balance sheet analysis?
A: Yes, though for balance sheets total assets would typically be the base.

Q5: How often should vertical analysis be performed?
A: With each financial reporting period to track trends and changes.