When calculating vertical analysis on the income statement, asset total is always the denominator but the total of all liabilities can also be used when calculating all liability financial statement percentages .
Vertical analysis is a financial analysis method in which each individual unit is listed as a percentage of a base figure within the statement. This means that income statement line items are expressed as percentages of gross sales rather than exact sums of money.
The asset total is typically used as the denominator, but the total of all liabilities can also be used when calculating all liability financial statement percentages and the total of all stockholders ’ equity when determining all equity line item ratios.
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