SH1664

Vertical Analysis in MS Excel

Analysis and Interpretation of Financial Statement
Objectives:

At the end of the exercise, the students will be able to:

 create a graphical vertical analysis of the financial statements using the built-in features
and functions of MS Excel.

Materials:
 Computer installed with MS Excel

Basic Principle/s:

By just looking at an Income Statement or a Statement of Financial Position, it can be difficult to

interpret all the peso amounts from one accounting period to another or to interpret one company's
financial records compared to another's over a period of time. A useful way to analyze these is by
performing both a vertical analysis and/or a horizontal analysis. This type of analysis allows
companies of varying sizes whose peso amounts are very different to be compared.

A Vertical Analysis is performed for a specific period such as monthly, quarterly, annually, etc. It
is then compared to similar periods such as the first quarter of 2015, the first quarter of 2016, the
first quarter of 2017, etc.

 When performing a Vertical Analysis of an Income Statement, Net Sales is usually used as
the basis for which all other items are compared. Net Sales is divided by itself making it
100%. All other items in the Income Statement are divided by the Net Sales.

 When creating a Vertical Analysis for a Statement of Financial Positon, total assets are
used as the basis for analyzing each asset account. Total liabilities and equity are used as
the basis for each liability and stockholder account.

NOTE: Only vertical analysis will be done for this activity.

Procedures:
1. Create a copy of the “SFP” sheet. Right-click the said sheet and select Move or Copy.

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2. Rename the new sheet as “SFP – Vertical”.

3. Select column C, right-click Insert. Select column G, right-click Insert.
4. In cells C4 and E4, type ‘Vertical Analysis’.

NOTE: Vertical Analysis (VA) compares an account to the total, the formula is
𝐴𝑐𝑐𝑜𝑢𝑛𝑡
[𝑉𝐴 = 𝑇𝑜𝑡𝑎𝑙 ]

5. Select C5 and type the formula: =B5/B15. Press F4 to make B15 absolute (=B5/$B$15).
The total is made absolute so that when the formula is filled, the cell for the total remains
constant.
6. Format cell C5. Click the Percent Icon on the Home Ribbon (Numbers Group).
7. Position the mouse on the Fill Handle. Click and drag to C8.
8. Select C9 and double click the AutoSum Icon. Click the Percent Icon.
9. Do the same procedure to Non-Current Asset, Current Liabilities, and Owner’s Equity.
Remember the amounts that need to be deducted under Owner’s Equity classification.
10. Vertical analysis for the Statement of Financial Position should look like this:

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11. Afterwards, create a graphical analysis of the Total Assets and Total Liabilities and Equity.
12. Select the account names and percentages for each account. Press Ctrl to limit selection.

13. After selecting the data, insert charts and choose Pie or Doughnut Chart.

14. Modify the desired presentation of the chart.

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15. Repeat procedures 11-14 to Total Liabilities and Equity.

16. Save the file.

17. Create a copy of the “IS” sheet by right-clicking the sheet and select Move or Copy.

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18. Rename the new sheet as “IS – Vertical”.

19. Modify the format of the Income Statement, so that Excel will read data only from the two
(2) ranges.

DON ACCOUNTING FIRM

Income Statement
For the Year ended December 31, CY

Professional Fees Php 247,500.00

Salaries Expense Php (15,000.00)
Utilities Expense Php (8,000.00)
Representation Expense Php (25,000.00)
Permits and Licenses Expense Php (10,000.00)
Net Income/(Loss) Php 189,500.00

20. In cell C4, type ‘Percentage’.

21. Select C5 and type the formula: =B5/B5. Press F4 to make B5 absolute =B5/$B$5).
22. Format the cell C5. Click the Percent Icon on the Home Ribbon (Numbers Group).
23. Position the mouse on the Fill Handle. Click and drag to C9.
24. Select C10, double-click the AutoSum Icon. Click the Percent Icon.
25. Vertical analysis for the Income Statement should look like this:

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26. Afterwards, create a graphical analysis of the Income Statement.

27. Select the account names and percentages for each account. Press Ctrl to limit selection.
28. After selecting the data, insert charts and choose Pie or Doughnut Chart.

29. Modify the desired presentation of the chart.

30. Save the file.

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