The comparison of a company's financial condition and performance to a base amount is known as:________

Vertical analysis is a technique for analyzing financial statements when each line item is listed as a percentage of a base amount. Vertical analysis of a cash flow statement displays each cash inflow or outflow as a percentage of the total cash inflows. Line items on an income statement can be expressed as a percentage of gross sales, while line items on a balance sheet can be expressed as a percentage of total assets or liabilities.

Understanding the association between individual elements on a balance sheet and bottom line, given in percentage, is made simpler by vertical analysis. When combined with horizontal analysis, which takes into account the financial situation across a specific time period, it can become a more powerful tool.

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