Analytical Tools in Financial Modeling – Vertical Analysis

Vertical Analysis in Financial Modeling

Vertical analysis, also known as common-sized statements, can be used by a good financial analyst to develop insights into the economic characteristics of different industries and of different firms in the same industry when building a financial model.

Look at the illustration below:

Vertical Analysis

In Common-sized statements, various components of the financial statements are standardized by expressing them as a percentage of some base.

Examples of common-sized statements include:

  • Components of the balance sheet expressed as a percentage of total assets
  • Components of the income statement expressed as a percentage of sales

There is also an excellent financial ratio analysis template available in the Finance 3.0 forums, that allows you to calculate, analyze and compare a set of business & financial ratios to assess & measure the operating performance of your own business or businesses / stocks that you intend to invest in.

This Excel template require you to be signed in to Finance 3.0 for free access and download.

Not a member? Sign up to Finance 3.0 today, free and quick registration process.

Visit Finance 3.0 - don't miss out on this high quality financial learning opportunity

Comment on this article