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When performing vertical analysis of an income statement, the base amount is ________.

a. sales revenue
b. total expenses
c. gross profit
d. net sales revenue

User Oentoro
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Final answer:

In vertical analysis of an income statement, the base amount is net sales revenue, which is used to understand the proportion of each account relative to total revenue.

Step-by-step explanation:

When performing vertical analysis of an income statement, the base amount is net sales revenue. Vertical analysis is a method where each entry for each of the three major categories of accounts in the income statement (revenues, expenses, and profits) is represented as a proportion of total revenue.

This analysis is useful for understanding the relative significance of each account in generating the total revenue of a business. Importantly, vertical analysis makes it easier to compare different companies of different sizes, as the figures are represented in percentage terms relative to a common base, which in this case, is the total revenue.

User Ismenia
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