An evaluation of anggntity’s single year financial statements would use which of the following analyses?

What Is Vertical Analysis?

Vertical Analysisevaluates a single year's financial statements by expressing each line item as a percentage of a base amount. For example, in an income statement, each expense may be presented as a percentage of total revenue.

This approach helps users understand the relative size of each financial statement item within the context of the total.

Why Is Vertical Analysis Used for a Single Year?

Vertical analysis focuses solely on relationships within a single set of financial statements, making it the appropriate choice for single-year evaluations.

Why Other Options Are Incorrect:

A. Comparative:Involves comparing financial data across entities or periods, not within a single year.

B. Horizontal:Focuses on changes in financial data over time (year-to-year comparisons).

C. Trend:Examines patterns over multiple periods to identify long-term trends, not a single year.

References and Documents:

GAO Financial Audit Manual:Recommends vertical analysis for single-year financial statement evaluations.

AICPA Financial Statement Analysis Guide:Provides detailed examples of vertical analysis techniques.