Question

Assume a company has sales of $300,000, total assets of $500,000, total liabilities of $200,000, net income of $23,000, and accounts payable of $7,000. If it is performing vertical analysis, what percentage would be assigned to accounts payable?

Answer 1

When performing vertical analysis, the percentage assigned to accounts payable would be 1.4%.

Step-by-step explanation:

When performing vertical analysis, we express each item on the financial statement as a percentage of a base amount. In this case, the base amount is the total assets of $500,000. To find the percentage assigned to accounts payable, we divide the accounts payable by the total assets and multiply by 100. So, $7,000 / $500,000 * 100 = 1.4%.