Would somebody give me an example of a Memo based a vertical analysis of the fol

Question

Would somebody give me an example of a Memo based a vertical analysis of the following requirements:

The memo to a company that explains your findings. You will need to include a section that explains the vertical analysis comparison between the two years, and you will need to include section(s) that not only define the ratios but explains the relevance of your calculation. Finally, in your concluding section, tell the company your recommendation for investing or not investing in the company and justify your recommendation.

Thank you in advance.

Explanation / Answer

Vertical analysis is the proportional analysis of a financial statement, In this all the components of the financial statement is measure as a percentage another component. In income statement all components are measured as a percentage of Sales & Similarly all components of balance sheet are measured as a percentage of assets

Vertical Analysis of P &L for Financial Year & Previous Year

Looking at the Data above we can conclude that the company is performance is consistant with improved Gross Margin and improved sales from the last year in actual however with other administrative expenses increasing the Contribution is still on lower side to incresae the Profit in actual or in comparision to sale -Company needs slightly better Sales with some control on increasing operating expenses - Still we recommend the investment in company as the Performance is showing a net profit of 10% or more as compared to sales

FY % PY % $ Totals Percent $ Totals Percent Sales 14,00,000 100% 13,00,000 100% Cost of goods sold 6,00,000 43% 5,50,000 39% Gross margin 8,00,000 57% 7,50,000 54% Salaries and wages 2,75,000 20% 2,51,500 18% Office rent 50,000 4% 45,000 3% Supplies 1,00,000 7% 90,000 6% Utilities 85,000 6% 80,000 6% Other expenses 1,40,000 10% 1,30,000 9% Total expenses 6,50,000 46% 5,96,500 43% Net profit 1,50,000 10.71% 1,53,500 10.96%

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