Question

In the vertical analysis of a balance sheet, a.each asset item is stated as a percent of total assets. b.each item is stated as a percent of change from the previous period's statement. c.each item is stated as a percent of owner's equity. d.each liability item is stated as a percent of total liabilities.

Answer 1

Answer:

a. each asset item is stated as a percent of total assets

Explanation:

A vertical analysis consists of showing the relative sizes of the different accounts in reference to which is considered the most important amount in a financial statement. In the Balance Sheet, this amount is Total Assets, and in the Income Statement is Revenues.  

It's very helpful to better understand the composition of a financial statement and key trends over time. It´s also used to compare two or more companies of different sizes.