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Vertical Analysis:
Vertical analysis involves the conversion of items appearing in statement columns into
terms of percentages of a base figure to show the relative significance of the items and
to facilitate comparisons. Vertical analysis is the procedure of preparing and
presenting common size statements. Common size statement is one that shows the
items appearing on it in percentage form as well as in Taka form. Each item is stated
as a percentage of some total of which that item is a part. Key financial changes and
trends can be highlighted by the use of common size statements.
Vertical Analysis of the Income Statement:
The most common use of vertical analysis in an income statement is to show the
various expense line items as a percentage of sales, though it can also be used to show
the percentage of different revenue line items that make up total sales. On an income
statement you conduct vertical analysis by converting each line into a percentage of
gross revenue.
Particulars
Gross Turnover
Less: Cost of Goods Sold
Gross Profit
Operating Expenses
Less: Office & Administrative Expenses
Profit from Operations
4%
10%
3%
12%
2%
14%
2%
14%
1%
11%
0.114
%
12%
1%
16%
1%
14%
2%
9%
2%
10%
3%
13%
3%
12%
4%
4.76
%
4%
5.63
%
4%
8.61
%
4%
7.31
%
Table: 3.2.1: Statements of Comprehensive Income of Robin Printing and Packages Ltd.
Source: Vertical Analysis of Financial Statement of Paper Board Unit (From June-2011 to June-2014)
Comments:
Above the Table (3.2.1) & Chart 3.2.1 shows that COGS in 2011 was 85% that is not
good for the company because High COGS resulting less Profit. If we consider 2011
was base year (100%) then in 2012 COGS was same. But in 2013 COGS was
improved that was almost 84% so in 2013 company may earn more Gross Profit.
Finally In 2014 COGS is 84%.so this is good for the company for generating profit.
Vertical Analysis of COGS to Gross Profit
Comments:
Above the Table (3.2.1) & Chart 3.2.2 shows that Gross Profit in 2011 was 14.53%. If
we consider 2011 was base year (100%) then in 2012 Gross Profit was 14.94% so it
increase profit than previous year. But in 2013 Gross Profit was improved that was
almost 16.24% so in 2013 company earn more Gross Profit than 2011&2012. Finally
In 2014 Gross Profit is 15.84%. So this company improves their Gross Profit year by
year.
Comments:
Above the Table 3.2.1 & Chart 3.2.2 shows that Profit from Operation in 2011 was
10%. If we consider 2011 was base year (100%) then in 2012 Profit from Operation
was 12% so it increase profit than previous year. And in 2013 Profit from Operation
was improved that was almost 14% so in 2013 company earn more Profit from
Operation than 2011&2012. Finally In 2014 Gross Profit also increased 14%. So this
company improves their Profit from Operation year by year.
Comments:
Above the Table 3.2.1 & Chart 3.2.4 shows that Earnings before tax in 2011 were 9%.
If we consider 2011 was base year (100%) then in 2012 Earnings before tax was 10%
so it increased profit than previous year. And in 2013 Earnings before tax was
improved that was almost 13% so in 2013 company earn more Profit than
2011&2012. Finally In 2014 Earnings before tax decreased to 12%. So this company
improves their Profit.