Final answer:
A vertical common size analysis for Best Buy over the last five years would involve calculating each line item of the income statement as a percentage of total sales for each year to facilitate year-over-year comparison and benchmarking against other companies.
Step-by-step explanation:
To perform a vertical common size analysis for Best Buy using the last 5 years of financial data, you would evaluate each item on the income statement as a percentage of total sales for each year. This involves taking every line item, such as cost of goods sold, gross profit, operating expenses, and net income, and dividing them by total sales. You would then express each result as a percentage. This process allows for easier comparison across different years or against other companies, regardless of size.
For example, if in year one total sales were $10 million and the cost of goods sold (COGS) was $6 million, COGS would be 60% of total sales. If in year two total sales increased to $12 million but COGS was $7.2 million, the percentage would still be 60%, indicating consistent cost management relative to sales.
Unfortunately, without specific financial data for Best Buy over the last five years, we cannot calculate the exact percentages. However, the method described above can be applied once the necessary financial statements are obtained to perform the analysis.