Question

When performing a vertical analysis which income statement item do you use to determine the cost contribution for each expense category? (What is the denominator?)

Review Later
Net income
Sales
Gross profit
Operating expenses

Answer 1

Sales represent the income statement item used in verticla analyses in order to determine the cost contribution for each expense category (Option C).

What is a vertical analysis?

In business, a vertical analysis represents a methodology used to examine financial statements that are ordered as specific points.

A vertical analysis analyzes numbers for only one period, conversely to the horizontal analyses that generally involve many different periods.

In conclusion, sales represent the income statement item used in verticla analyses in order to determine the cost contribution for each expense category (Option C).

Learn more about the vertical analysis here:

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