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Using vertical analysis of the income statement a company's net income as a percentage of net sales is 10%; therefore the cost of goods sold as a percentage of sales must be 90%.
Vertical Analysis
A technique for evaluating financial statement data that expresses each item within a financial statement as a percentage of a base amount.
Net Income
The net income of a business following the subtraction of all costs and taxes from its revenue.
Net Sales
The revenue a company earns from goods sold or services provided after returns, allowances for damaged goods, and discounts are subtracted.
- Master the objectives and methods in the analysis of financial statements, focusing on horizontal and vertical analysis.
- Understand the concept of common size analysis and its application in evaluating financial statements.
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Learning Objectives
- Master the objectives and methods in the analysis of financial statements, focusing on horizontal and vertical analysis.
- Understand the concept of common size analysis and its application in evaluating financial statements.
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