Final answer:
Using vertical analysis, net sales are assigned a value of 100% as it is the base figure from which all other line items on the income statement are compared.
Step-by-step explanation:
In vertical analysis, each item on a financial statement is presented as a percentage of a significant total. For the income statement, this significant total is typically net sales. Net sales would be assigned the value of 100%, as it is the base figure to which all other components are compared. Other items on the income statement are then expressed as a percentage of net sales, allowing for comparisons across companies or reporting periods regardless of size.
Vertical analysis is instrumental when performing financial ratio analysis, enabling stakeholders to assess the company's financial health and operational efficiency. Using vertical analysis, the percentage assigned to net sales can be calculated by dividing net sales by the total sales and multiplying by 100.