Vertical analysis

To evaluate accounting information, business people evaluate financial statements in three broad areas (1) horizontal analysis, (2) vertical analysis, and (3) ratio analysis. 

Vertical analysis is another strategy employed by accountants to analyze financial statements. When an income statement is used for verhcal analysis, each account in the statement is expressed as a percentage of net sales, i.e., dividing the total amount of any item by the total of net sales. A firm would... 

In a balance sheet, total assets and total liabilities should be used as denominators to determine the percentage of specific assets, liabilities, and owner s equity, respectively. All financial statement users, including shareholders, will exhibit concern because this drop in gross profit may make the firm report a net loss on the current income statement. Table 9.9 illustrates a sample of vertical analysis for a balance sheet. 

In addition to using financial statements for comparative horizontal and vertical analysis, ratios are another available tool. Developing relationships among financial statement items is the crux of ratio analysis. In this type of analysis, it is extremely important for the evaluators, such as creditors or management, to select the ratio applicable to their immediate area of concern. Then, the relevant ratio can be calculated for analysis, and, finally, more research might be necessary as ratio analysis is limited. 

Note (1) The vertical analysis of the balance sheet reflects any account selected as the numerator and the amount of total assets as the base or denominator (e.g., cash account 32,000/ 186,330). (2) Each liability or owner equity account is divided by the total of liabilities and owner s equity. 

Kim J-S, Ho PKH, Murphy CE, Friend RH (2004) Phase separation in polyfiuorene-based conjugated polymer blends lateral and vertical analysis of blend spin-cast thin films. Macromolecules 37 2861... 

TABLE 12.1. Movements of the simplex vertices, analysis conditions for the six variables, and snhscqncnt correlation coefficient (r ) ... 

The artifact is degraded with extensive void volume, and massive sections of level-2 and -3 heavy decay. Vertical analysis is revealed by profile sections taken at 6-in. (15.2-cm) intervals (Figure 26). 

J.-S. Kim, P. K. H. Ho, C. E. Murphy, R. H. Friend, Phase Separation in Polyfluorene-Based Conjugated Polymer Blends Lateral and Vertical Analysis of Blend Spin-Cast Thin Films. Macromolecules 2004,37,2861-2871. 

The proposed model is built by combining two directions analysis approach. Because the response Y is a function of control factors and time, it is reasonable that the tentative relationship can be analyzed according to two directions. In vertical direction, let Y = [Yd Yc2. .. Ycm] is the matrix of mean responses in which Yd, Yc2,. ..and Ycm are column vectors in the Table 1. Each column of Y will be a function of design matrix X, in horizontal direction, each row of Y will be a function of time t. The RSM is utilized for both of direction of analysis. Let consider the vertical analysis in which the model for each column of Y, Yc (Yd to Ycm), will be a function of control factors represented by the design matrix X ... 

While vertical analysis can express the relationship between responses Y and control factors x represented by design matrix X, horizontal analysis also proposed to build the relationship between responses Y and time t. In horizontal direction, let Y = [Yh Yr2 . . Ym] is the matrix of mean responses in which Yri, Yr2,. ..and Ym are row vectors in the Table 1. Choosing the models for rows of Y (Yr), each row Yr will be a function of t ... 

With available data, interaction model (first order for X] and X2 and their interaction X1X2) is applied for vertical analysis and second order model is applied for horizontal analysis for both mean and variance response models. With available data, the R-square values of mean functions for both of direction analysis range from 0.735 to 0.999 while those of variance functions range from 0.07 to 0.98. 

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