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Introduction: Vertical Analysis, is where you compare items on a statement to one number that represents the whole. The most common numbers used as the whole or total are total assets and/or total revenues. Each line item is divided by the total to arrive at a percentage that represents how much each item is in comparison to the complete amount. Think of it as slices in a pie. Each slice represents a percentage section of the whole pie. Example problem: Morrison Pet Supply Company Comparative Balance Sheet Vertical Analysis
Account Titles Assets Cash Accounts Receivables Prepaid Rent Inventory Supplies Land Building Accumulated Depreciation-Building Equipment Accumulated Depreciation-Equipment Total Assets Liabilities Notes Payable Accounts Payable Salaries & Wages Payable Unearned Pet Supplies Revenues Total Liabilities Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities and Stockholders Equity 2013 10,000 6,200 3,500 8,000 500 25,000 15,000 (9,000) 9,000 (3,600) 64,600 9,000 4,000 1,200 250 14,450 33,000 17,150 50,150 64,600
Figure 1
Percent 15.5% 9.6% 5.4% 12.4% 0.8% 38.7% 23.2% (13.9%) 13.9% (5.6%) 100.0% 13.9% 6.2% 1.9% .4% 22.4% 51.5% 26.5% 77.6% 100.0%
2014 15,500 6,300 4,000 7,500 800 25,000 15,000 (12,000) 9,000 (5,400) 65,700 9,000 4,500 1,200 250 14,950 33,000 17,750 50,750 65,750
Percent 23.6% 9.6% 6.1% 11.4% 1.2% 38.1% 22.8% (18.3%) 13.7% (8.2%) 100.0% 13.7% 6.8% 1.8% .4% 22.8% 50.2% 27.0% 77.2% 100.0%
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