Vertical analysis is a technique for analyzing financial statements in which each line item is listed as a percentage of a base amount. Therefore, 1) line items on an income statement can be expressed as a percentage of gross sales, 2) while line items on a balance sheet can be expressed as a percentage of total assets or liabilities, 3) and vertical analysis of a cash flow statement displays each cash inflow or outflow as a percentage of the total cash inflows.
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