# Vertical Analysis Calculator

Vertical analysis allows the comparison of financial statements by representing each line item on the statement as a percentage of another (base) line item.

The vertical analysis calculator allows for details of an income statement and a balance sheet to be entered, and calculates each line item as a percentage of the relevant base line item. The use of vertical analysis as a comparison tool is discussed more fully in our vertical analysis tutorial.

## Formula for Vertical Analysis Calculator

For the income statement the vertical analysis calculator works out the percentage each line item is of total revenue. The vertical analysis formula used for each income statement line item is given by:

`Line item % = Line item value / Revenue`

For example, if the income statement has total revenue of 40,000, and shows operating expenses of 16,000, then operating expenses are 16,000/40,000 = 40.0% of total revenue

For the balance sheet, the vertical analysis calculator works out the percentage each line item is of total assets. The vertical analysis formula used for each balance sheet line item is given by:

`Line item % = Line item value / Total assets`

For example, if the balance sheet has total assets of 31,000, and shows inventory of 4,000, then inventory is 4,000/31,000 = 12.9% of total assets. ## Instructions

The Excel vertical analysis calculator, available for download below, is used to produce the vertical analysis by entering details from the income statement and balance sheet of the business. The calculator is used as follows:

### Step 1

Enter the relevant accounting period, for example, Year 1, 2016, Month 1 etc.

### Step 2

Enter the income statement information for the business. The information will be for the relevant accounting period, such as the year ending 2015, and will come from management information, published financial statements, or from industry standards used for comparisons.

The vertical analysis calculator calculates the percentage each income statement line item has to the revenue line.

### Step 3

Enter the balance sheet information for the business. The balance sheet information will be as at the end of the accounting period, and again will come from management information, published financial statements, or from industry standards.

The vertical analysis calculator calculates the percentage each balance sheet line item has to the total assets line.