Question

A vertical analysis calculates percentages to compare the parts of an individual statement to the whole. For example, on an income statement, each item could be shown as a percentage of net sales.1. True2. False

Answer 1

Answer:

1. True

Explanation:

Vertical analysis the the percentage calculation of each item of Income statement with Gross revenue. We calculate the percentage of Gross margin which is the percent of Gross income and gross sales. Just like this the COGS to sales, Net income margin, operating income margin and operating expenses to sales ratio are calculated in vertical analysis to check the sensitivity of each part of the income to the gross income.

Ye it is true that A vertical analysis calculates percentages to compare the parts of an individual statement to the whole. For example, on an income statement, each item could be shown as a percentage of net sales.