Vertical analysis

Vertical analysis expresses every line on a financial statement as a percentage of a base figure, such as revenue on the income statement or total assets on the balance sheet, within a single period.

ByHoang TruongUpdated July 5, 2026

See it move

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Vertical analysis expresses every income-statement line as a percentage of revenue for one period. A company's €5,000,000 revenue is the 100% base. Cost of goods sold of €3,000,000 is 60% of revenue, operating expenses of €1,200,000 are 24%, and operating profit of €800,000 is 16%. Expressing each line this way lets analysts compare companies of very different sizes on the same footing.

Where it fits

SubjectFinancial AccountingCoreTopicFinancial Statement Analysis & RatiosCore

The formula

LaTeX

\%_{\text{line}} = \dfrac{\text{Line item}}{\text{Base figure}} \times 100

Variables

$L$: Line item value (€)
$B$: Base figure (revenue or total assets) (€)

Expresses each statement line as a share of a common base, so companies of very different sizes can be compared directly.

Check yourself

PracticeCORE

A retailer reports total assets of €2,400,000, revenue of €1,000,000, and inventory of €360,000 at year end. Using vertical analysis with total assets as the base, what percentage of total assets does inventory represent?

Select an answer to check your understanding.