Question

In a vertical analysis of a balance sheet, which of the following would be shown at 100%?

a. Total property, plant, and equipment
b. Total liabilities
c. Total stockholders' equity
d. Total liabilities and stockholders' equity

Answer 1

In a vertical analysis of a balance sheet, 'Total liabilities and stockholders' equity' would be shown at 100%, as it serves as the base figure for comparison with other line items.

Step-by-step explanation:

In a vertical analysis of a balance sheet, the total at 100% would be 'd. Total liabilities and stockholders' equity'. This represents the base figure to which all other line items are compared. In vertical analysis, each line item on the balance sheet is listed as a percentage of another line item, which is set at 100%.

For the balance sheet, this base is often total assets, or total liabilities and stockholders' equity, supporting the fundamental accounting equation: Assets = Liabilities + Stockholders' Equity.

Therefore, when you look at a balance sheet in a vertical format, every individual asset, liability, and equity figure is expressed as a percentage of the total liabilities and stockholders' equity.