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please also explain how vertical analysis is done
URCES Practice Brief Exercise 02 Using these data from the comparative balance sheet of Pharoah Company, perform vertical ana
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31-Dec-20 31-Dec-19 Analysis
Amount Percentage Amount Percentage
Accounts Receivable        502,000 15.75%      433,000 15.92% The Accounts Receivable as a ratio of Total Assets has gone down slightly from 15.92% to 15.75%. This means that share of debtors have reduced to a slight extent and collections from debtors have formed part of cash/bank
Inventory        792,000 24.85%      561,000 20.63% The Inventiry as a ratio of Total Assets has increased from 24.85% to 20.63%. This means that share of inventory have increased in the total assets, thus leading to greater investment in inventory, thereby blocking the working capital.
Total Assets     3,187,000 2,719,000
Ratio is derived by dividing the Accounts receivable or inventory by total assets.
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