How Do You Perform Vertical Analysis Using A Common Size Balance Sheet?
Analyzing balance sheets is an integral part of financial analysis for businesses. Financial analysis helps businesses determine where their financial position stands and also compares it to their previous financial position as well as helping businesses make long and short term goals for future initiatives. When performing analysis of financial statements the common size balance sheet is interpreted. The percentages of the common size balance are analyzed vertically. This means that the common size balance sheet is analyzed against itself and at times against common sized balance sheets from different financial periods. This guide will show how to interpret the common size balance sheet to perform the vertical analysis portion of a businesses financial analysis process. Place both balance sheets side by side so that you will be able to easily view the data in both sheets simultaneously. Verify that the sum of the asset percentages equal 100 percent for each sheet. Do the same for the
