Question

A vertical analysis calculates percentages to compare the parts of an individual statement to the whole. For example, on an income statement, each item could be shown as a percentage of net sales.1. True2. False

Answer 1

Answer:

False

Explanation:

On an income statement, each item should be shown as a percentage of total sales (not net sales).

A vertical analysis uses percentages to compare different items one a financial statement using a base account. Total sales is used as the base account on an income statement, and total assets are used as the base account on a balance sheet.