The financial vertical analysis refers to particular process through which financial statements are analyzed. Through this process every entry for particular major and minor categories of amounts is examined. This includes assets, equities, and liabilities in a balance sheet. These need to be represented in proportion in the balance sheet in order to gain total amount. Most of the analysis is done in order to find out the determinants of the financial performance of the business.
This is held in relations to clients and financial models that are set up for the purpose of financial projects. There are various causal variables to consider in terms of strategizing a proper financial budget for a project. There should be a number of financial policies considered as well. There should be full adherence to the restrictions set up the organization as well. The vertical analysis can be done in balance sheets of various sizes and it becomes easier to assess the changes in the company.
Sample Financial Vertical Analysis
The following in the financial vertical analysis of COMPA Co for the year 2011-2012:
Financial Documents concerned:
- Share of Market and its growth
- Capital concentration
- Investment in shares
- Advertising and PR relations and research
The performance of COMPA needs to be done in terms of the return of profit, equity and assets. There are other performance measures which are not found concerning this financial year.
Analysis of Balance sheet:
- Method of estimation: Adequate
- Model execution: As specified
- Returns projected: Stable
- Estimation of share growth: High
- Environment for research: Good
- Stability: High
Thus, the balance sheet stands as follows:
- Total Assets (capital only; not including working capital): $223,000
- Total Liabilities: $222,000
- Profit for the year: $11000
- Scrap Value: $2345
The profit generation of this company is high and should carry on accordingly.