Meaning & use
vertical analysis
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Meaning
noununcountablebusinessfinance
A method of financial analysis where each item on a statement is shown as a percentage of a base figure, such as total sales.
Grammar: Uncountable: say 'vertical analysis', not 'a vertical analysis' when referring to the method in general.
Patterns
- vertical analysis of something
- perform vertical analysis
- use vertical analysis
Vertical analysis shows that cost of goods sold is 60% of sales.
The accountant performed a vertical analysis of the income statement.
In vertical analysis, each line item is expressed as a percentage of total assets.
Common combinations
- vertical analysis of the balance sheet
- The vertical analysis of the balance sheet revealed that inventory is 30% of total assets.
- common-size vertical analysis
- Common-size vertical analysis helps compare companies of different sizes.
- perform vertical analysis
- Analysts perform vertical analysis to spot trends in cost structure.
- vertical analysis percentage
- The vertical analysis percentage for rent was 15% of revenue.
Synonyms and how they differ
- common-size analysis
- A near-synonym; 'common-size analysis' is often used when all items are shown as percentages of a total, which is exactly what vertical analysis does.
Opposites
Commonly confused: vertical analysis or horizontal analysis?
vertical analysis vs horizontal analysis
Horizontal analysis compares figures across time periods, while vertical analysis compares items within one period.
Practice
What does vertical analysis express each item as?
Choose one answer.
Vertical analysis shows each line as a percentage of a base (like total sales). The other options describe different analyses or forecasts.
Make it your own
Write a sentence using “vertical analysis”, then check it and compare it with the examples above.