Final answer:
The base amount in vertical analysis is always the total number on the financial statement, which acts as a reference point for calculating the proportion of all other amounts.
Step-by-step explanation:
In vertical analysis of financial statements, the base amount is always the total number in the respective financial statement. This means when you're looking at an income statement, balance sheet, or any other financial statement, you will use the total revenue, total assets, or total liabilities (depending on the statement you're analyzing) as your point of reference to which all other amounts will be compared as a percentage.
For example, if total revenue for a period is $600,000, and the cost of goods sold (COGS) is $200,000, the vertical analysis would show COGS as a percentage of total revenue by dividing $200,000 by $600,000, resulting in a percentage that reflects the proportion of COGS relative to total revenue.