How Do You Do A Vertical Analysis Of A Balance Sheet?
A balance sheet is a financial statement that lists a business’ assets, liabilities, and equity. Financial statements can be analyzed either vertically or horizontally. Horizontal analysis is used for comparing year-over-year trends. This analysis will spot categories that are growing and shrinking as percentage of the whole and at what rate. A vertical analysis is used to compare two entities of different sizes Step 1 Start Excel with your current balance sheet entered in. Make sure that assets, liabilities, and owners equity are all separated as they would be on a traditional balance sheet. Step 2 Use Excel’s division formula to calculate the percentage of total assets that each categories uses. For example, if total assets is in cell C16 and cash is cell C9 next to cell C9 enter ‘=c9/c16’. Be sure to format your percentage cells as percentages and your balance statement cells in dollars. Step 3 Repeat the process for the other entities you are comparing to the first business. Step 4
