Vertical Analysis
Categories: Education
It’s your favorite document: income statements for firms.
Income statements list items and services by cost in a given year, expressed as a percentage of gross sales. Maybe your dog poop cleanup business spends 70% of its gross sales on gas last year.
At the end of the income statement are aggregated assets and liabilities. Your assets are what you've got...like, incoming cash from sales, and long-term assets, like your car and pooper scooper: the gift that keeps on giving.
The liabilities include what you owe: loan payments on your car, and the money to pay yourself, a.k.a. owner’s equity.
Your assets and liabilities will each total 100%, with your assets equaling your liabilities.
And...that’s it. That’s vertical analysis: the method of listing each line item for both assets and liabilities as percentages on a financial statement.
Vertical analysis is most useful in comparing year-to-year costs. For instance, you might find that you paid 70% of your gross sales on gas last year, but 78% of your gross sales on gas this year. That will lead you to think: "Hmm, why is that happening?" Maybe your biggest client, a Newfoundland, passed away. You found replacement business, but it requires you to drive farther. Or maybe gas prices rose. If this trend continues, you may consider switching out your current car for a more fuel efficient one so you can save more on gas.
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Finance: What is The Difference Between ...6 Views
Finance allah shmoop What is the difference between a horizontal
merger and a vertical merger Okay Mergers let's talk rock
As in a feller he was kind of the king
of mergers both vertical and horizontal Let's Talk about what
comprises each of these things All right in the energy
industry specifically oil Ah horizontal monopoly would exist if a
company owned all the oil wells in the world And
in fact for a short time opec owned well it
was very close to a monopoly at least an enormous
percentage of all the oil wells in the world such
that they were able to constrain supply create panic and
increase prices dramatically some five hundred percent and change the
world during the nineteen seventies when we had a very
weak president going against them and here's what inflation adjusted
prices for a barrel of oil looked like in that
period So that's a horizontal monopoly like where you own
all the sources of oil coming out of the ground
horizontal So what's a vertical monopoly Well in the process
of processing oil a lot has to happen for the
system to work right first step you have to pull
All the oil out of the ground right the oil
well but then you have to process it or synthesize
it from dinosaur coop into well something that's actually usable
in your lexus with the turbo engine Then because the
world demand is continuous you have to store the oil
and then distributed continuously forever and ever and ever and
eventually the retail customer buyer has to be ableto pull
up into a gas station think real estate here and
fill her up So if you owned a vertical monopoly
while you would own the discovery and mining of oil
the synthesis or processing of it or refining of it
as it's called in the industry you don't a storage
company a trucking and distribution company and while then a
bunch of gas stations well that would be a fully
integrated vertical monopoly So when horizontal and vertical mergers get
discussed they get framed under this format So let's say
we're coric coffee machines and we want a vertical merger
in our business because we're sick and tired of paying
coffee growers twelve cents a cup for something well that
cost them less than a penny So we at keurig
Decide to buy our own coffee plantation roasting and grinding
and processing company so that we can supply our own
coffee in our own little cups Well that would be
a vertical merger in the coffee business And it often
makes a lot of sense because all that profit that's
been given out to coffee vendors selling to the kindly
loving caffeinated folks at koi rig with then be capped
and retained by the kindly loving shareholders of keurig vertical
versus horizontal Good ways to emerge and good ways to
have a baby too But we're a g rated site 00:02:51.243 --> [endTime] so we're just just saying moving on Oh