Question

Which of the following statements is true with respect to vertical analysis?

a)It focuses on the relations among financial statement accounts at a given point in time.
b)It focuses on the relations among income statement accounts, but not balance sheet accounts.
c)It focuses on the relations among financial statement accounts over time.
d)It focuses on the relations among balance sheet accounts, but not income statement accounts.

Answer 1

Vertical analysis focuses on the relations among financial statement accounts at a given point in time and is used for both balance sheet and income statement accounts.

Step-by-step explanation:

The correct answer to the question - Which of the following statements is true with respect to vertical analysis? - is option a) It focuses on the relations among financial statement accounts at a given point in time.

Vertical analysis is a method used in financial analysis to show each item in a financial statement as a percentage of a base figure within the statement. This type of analysis is used for both the balance sheet and income statement, and it helps in making comparisons over different periods or among different companies easier as it shows the relative sizes of accounts.