Vertical analysis is a technique for evaluating financial statement data by expr

Question

Vertical analysis is a technique for evaluating financial statement data by expressing each item in a financial statement as a percent of a base amount in that statement. Ceradyne, Inc. presented the following data for a company: Current liabilities $360 Long-term debt 480 Common stock 640 Retained earnings 520 Total liabilities & stockholders’ equity $2,000 How would common stock appear on a common size balance sheet using vertical analysis? Entry field with incorrect answer 75.0% 55.1% Cannot be determined from the data given 32.0%

Explanation / Answer

In vertical analysis, Common stock shall be represented as a percentage of the total of the balance sheet i.e. Total liabilities and stockholder's equity.

Common stock percentage = $640 / $2,000 = 0.32

Hence, answer is 32%

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