A vertical financial statement is a document prepared by the finance authorities of a company or business, or even of an individual, which highlights the financial statement of the company for a particular period of time by mentioning various factors as the percentage of one decisive singular factor. For example, if the gross income of the company is factor A, then all other items like sales, liabilities, debts must be depicted as a percentage of factor A.
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Sample Vertical Financial Statement:
Name of company: Siam Pvt. Ltd.
Year of establishment: 1992
Vertical financial statement for the time period: June 2011 to June 2012
Vertical financial statement prepared by: Brian Vickers, Head, Department of Finance.
Date of submission of vertical finance statement: 12th July 2011
Gross income for the period stipulated: $ 44 million
Liabilities incurred for the period given: $ 20 million [45.45% of the gross income]
- Bank loans worth $ 2 million [4.54% of gross income]
- Outstanding salaries due to employee: 10 million [22.72% of gross income]
- Debts to creditors: 8 million [18.18% of gross income]
Net profit for the financial year given: $ 24 million [54.54% of gross income]. This is an increase by 2 % from the last financial year’s net profit.
Purpose of vertical financial statement:
- It allows us to view the financial details in perspective, that is, with respect to one factor which is held as the basis against which other factors will be compared.
- It allows for relative comparison with records of previous years as well. Thus, improvements or the lack of it can be more easily determined by such a relative assessment.