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Financial Statement Analysis: Vertical Analysis – Financial Accounting video financial analysis

by Langsongshipin123



Discussion of the different ways of performing financial statement analysis including examples of ratio calculations and comparisons.

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Other videos in this series:
Part 1 – Introduction to Financial Statement Analysis
Part 2 – Horizontal Analysis
Part 3 – Trend Analysis
Part 5 – Comparing One Company with Another
Part 6 – Using Ratios and Comparing to Industry Averages (Part 1)
Part 7 – Using Ratios and Comparing to Industry Averages (Part 2)
Part 8 – Using Ratios and Comparing to Industry Averages (Part 3)
Part 9 – Using Ratios and Comparing to Industry Averages (Part 4)
Part 10 – Using Ratios and Comparing to Industry Averages (Part 5)

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27 comments

Laura Emelda 07/09/2021 - 4:42 PM

Thanks this video is very useful for me❤️

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Shawn T 07/09/2021 - 4:42 PM

Im here 1 hour before I take an exam and wheeww you just lowered my anxiety. Your teaching technique is very clear and easy to follow. Thank you !

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Karla Diez 07/09/2021 - 4:42 PM

Thank you

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Sheila Burrier 07/09/2021 - 4:42 PM

Do you have a video for horizontal? 🙂

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Sheila Burrier 07/09/2021 - 4:42 PM

Marry me? You just saved my rear end. HAHA. Jk. 😉

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Master Franko 07/09/2021 - 4:42 PM

thank you

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Silvia Delgado 07/09/2021 - 4:42 PM

hello, i want to know if debts can go in total assets in our vertical analysis?… i don't understand my slides… I studied that Debts=liabilities, right? so, why debts are in the total assets percentage? please help…..

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Momtopeaches 07/09/2021 - 4:42 PM

THANK YOU!!!

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REBUILTGOLEM74 07/09/2021 - 4:42 PM

How would you calculate net income if you already had just the percentages?

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Antoinette Milano 07/09/2021 - 4:42 PM

Thanks Brian! Loved this tutorial. Very concise and to the point as well as helpful.

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klea orosa 07/09/2021 - 4:42 PM

Hello Sir. Brian,
Thank you so much for this lecture your really help me a lot. 

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Francisca Valenzuela 07/09/2021 - 4:42 PM

thanks i understand you betetr then my books

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Lamik 4000 07/09/2021 - 4:42 PM

Dude, thank you. I was lost. 29 year old college junior here. I've been out of school for a while but your video just helped me @ 1:07a.m. THANK YOU AGAIN!

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Jairen Chan 07/09/2021 - 4:42 PM

Thanks, big help 

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Sarah L 07/09/2021 - 4:42 PM

Hello Brain,
I just wanted to say thank you for making it simple. I really like that you walk through each step. With my accounting class my mind is often way over thinking simple and sometimes it is hard to back track to simple things. Again thank you for walking through the math of the problem and not just assuming we all know what we are doing.

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Dr. Brian Routh 07/09/2021 - 4:42 PM

nawwaf husseini, this question is very difficult to answer as it may change depending on the industry of the company. Some companies are very highly financed by debt whereas others may be more heavily financed with equity. In all financial analysis situations, it's imperative to do your research within the industry of the company that you are investigating to ensure that it close to the industry average or better.

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Anonymous 07/09/2021 - 4:42 PM

Hey Prof, quick question. When doing these types of analysis, we only include the main accounts in the balance sheet, right? As in PPE net, instead of doing each individual account that goes into that account (lands, buildings, etc)?

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For GOD so loved the world JOHN316 07/09/2021 - 4:42 PM

Thank You

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Dr. Brian Routh 07/09/2021 - 4:42 PM

Hi DJ… Thank you for watching my financial accounting video on vertical analysis… I am glad that you found it helpful. I do have videos available on ratio analysis on my YouTube home page or my website at TheAccountingDr . com (under videos, Financial Statement Analysis). Please subscribe to my YouTube channel to receive notifications as new accounting videos are posted.

Happy Accounting!

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DJ Hwang 07/09/2021 - 4:42 PM

I was little bit struggle about accounting for doing homeworks, assignments and prefer to my uni exam and I was searching on the internet and find this one and it was totally awesome and easy to understand step by step thank you so much umm can I ask one for… what if I have question about any other quetions about accounting such as calculate any type of ratio etc. whenever you check and help to answer please? Sincerely, In-Kyu Hwang call me DJ, I use that for my english name

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Dr. Brian Routh 07/09/2021 - 4:42 PM

Thanks for your question. This is actually not easily answered. Some ratios do have a "rule of thumb" that managers/investors can use to evaluate a company's financial health. However, most ratio analysis must be compared to the industry averages that a certain company belongs to. For example, you can't compare the ratios of Radio Shack with those of Wal-Mart; they are in two different industries.

Thanks for watching my accounting videos. Visit me online @ TheAccountingDr . com

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nawwaf husseini 07/09/2021 - 4:42 PM

So what is a good balance sheet structure, like what percentage of liabilities to assets is considered healthy, vs. the percentage of equity to assets.
Thanks,

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Dr. Brian Routh 07/09/2021 - 4:42 PM

We use the percentages on the balance sheet to help make future decisions. For example, if you are researching/examining a company for investing purposes and you find that accounts receivable (money owed to the company by customers) is 85% of total assets that may give you reason for pause. This would mean that all other assets make up on 15% of total assets (i.e. cash, inventory, prepaids, etc.). Percentages give a quick way to make observations and decisions that $ sometimes does not provide.

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Dr. Brian Routh 07/09/2021 - 4:42 PM

Under a vertical analysis (up and down) we express each item on the balance sheet as a percentage of total assets. For example, if we divide our cash by total assets, that will give us the percentage of total assets made up of cash versus the other assets. This gives further insight into decision making.

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Aziz Beşli 07/09/2021 - 4:42 PM

what do you find percent on balance sheet i dont understand this part . Can you write this . thak you for helping.

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Dr. Brian Routh 07/09/2021 - 4:42 PM

I am glad that you enjoyed my accounting video on vertical analysis. I have enjoyed making all the videos so far and I hope that I will be able to get more up soon. Let me know if there is a specific topic of interest and I will try and get that up as soon as possible.

Please subscribe to my channel so you will be notified you I upload new videos.

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If you have any questions I am more than happy to help!

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Dr. Brian Routh 07/09/2021 - 4:42 PM

SuperAdnan04, the reason we divided each asset on the balance sheet by total assets in a vertical analysis is because we want to get an idea of what percentage each asset is as a percentage of total assets. This process shows investors what assets make up portions of total assets. For example, if land is 80% of total assets, the company would likely have some difficulty paying ST debt (use current ratio for confirmation). We would want to do the same thing with liabilities and equity.

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