12.3 Perform a vertical analysis of financial statements
1) A vertical analysis differs from a horizontal analysis in that an item is selected as the base amount and all other items are computed as a percentage of the base amount.
2) The base amounts for a vertical analysis are net income and total equity.
3) Net sales at Kelly's Bakery increased from $40,000 to $60,000 and its cost of goods sold increased from $20,000 to $40,000, then vertical analysis based on net sales would show the following percentages for cost of goods sold (rounded to the nearest percent):
A) 40% and 20%.
B) 10% and 30%.
C) 50% and 67%.
D) 67% and 40%.
E) 33% and 50%
4) For vertical analysis purposes, the base item on the balance sheet is __________.
5) For vertical analysis purposes, the base item on the income statement is __________.
6) If Rick's net sales increased from $40,000 to $80,000 and its operating expenses increased from $30,000 to $50,000, then, using vertical analysis based on net sales, what percentages would show for operating expenses for the two periods (to the nearest tenth of a percent)?