ExpertEasy1 markMultiple Choice
CPA · Question 20 · Area I: Business Analysis
In performing a vertical analysis of a company's Income Statement, which of the following is the correct base for calculation?
In performing a vertical analysis of a company's Income Statement, which of the following is the correct base for calculation?
Answer options:
A.
Total Assets
B.
Net Sales (Revenue)
C.
Net Income
D.
Gross Profit
How to approach this question
Recall the base for Vertical Analysis (Common Size). Balance Sheet base = Total Assets. Income Statement base = Net Sales.
Full Answer
B.Net Sales (Revenue)✓ Correct
B
Vertical analysis (common-size statements) expresses each line item on the income statement as a percentage of Net Sales (Revenue).
Common mistakes
Confusing with Balance Sheet base (Total Assets).
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