Question

In vertical analysis, the base amount for each income statement item is

net sales.

net income.

sales.

gross profit.

Answer 1

In vertical analysis the base amount for each income statement item is net
sales. In each column of income statement the net sales figure is used as 100
percent. Every amount in the column is expressed as a percentage of net sales.
To compute an item’s percentage of net sales, the amount of that item should be
divided by the amount of net sales.