Dividing each expense item in the income statement of a given year by net sales to identify expense items that rise more quickly or more slowly than a change in sales.
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On a balance sheet, a means of calculating assets, liabilities, and equities in which each intake or outlay is represented as a percentage of each group. For example, suppose a company has three liabilities: a debt to the bank, a bond issue, and salaries to employees. Vertical analysis would record each of these on a balance sheet as a percentage of the total amount the company carries in liabilities.
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The comparison of an item on a financial statement with a different item on the same statement. For example, an analyst may study a firm's balance sheet to compare the level of current assets with the level of current liabilities in order to measure liquidity. Analysts often study a firm's income statement to compare net income with total sales. Compare horizontal analysis.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.