Question

Perform a vertical analysis on the following information. (Round your answers to 1 decimal place.) 2021 2020 Amount % $ Cash Accounts receivable Inventory Long-term assets Total assets 420,000 660,000 1,020,000 3,900,000 6,000,000 Amount $ 1,050,000 300,000 925,000 2,725,000 $ 5,000,000 $

Answer 1

In vertical analysis, each line item of the balance sheet is divided by the total assets or total liabilities in order to arrive at the percentage figure which the line item contributes to total assets or total liabilities

The following table shows the calculations :

Percentage for any year

= Line item value / Total Assets

For example, for 2021 and 2020, For cash, the calculation will be :

2021

= $420,000 / $6,000,000 x 100

= 7%

2020

= $1,050,000 / $5,000,000 x 100

= 21%

	2021		2020
Particulars	Amount	%	Amount	%
Cash	420000	7.0	1050000	21.0
Accounts Receivable	660000	11.0	300000	6.0
Inventory	1020000	17.0	925000	18.5
Long-term assets	3900000	65.0	2725000	54.5
Total assets	6000000	100.0	5000000	100.0