3.2.

Vertical Analysis:
Vertical analysis involves the conversion of items appearing in statement columns into
terms of percentages of a base figure to show the relative significance of the items and
to facilitate comparisons. Vertical analysis is the procedure of preparing and
presenting common size statements. Common size statement is one that shows the
items appearing on it in percentage form as well as in Taka form. Each item is stated
as a percentage of some total of which that item is a part. Key financial changes and
trends can be highlighted by the use of common size statements.
Vertical Analysis of the Income Statement:
The most common use of vertical analysis in an income statement is to show the
various expense line items as a percentage of sales, though it can also be used to show
the percentage of different revenue line items that make up total sales. On an income
statement you conduct vertical analysis by converting each line into a percentage of
gross revenue.

Robin Printing & Packages Ltd.

42/43, Purana Paltan, Dhaka-1000.
Statement of Comprehensive Income

Particulars

Gross Turnover
Less: Cost of Goods Sold
Gross Profit
Operating Expenses
Less: Office & Administrative Expenses
Profit from Operations

Add: Other Income

Paper Board Unit

June
Jun
Jun
June
- 11
e-12
e-13
- 14
100% 100% 100% 100%
85%
85%
84%
84%
14.53
14.9
16.2 15.84
%
4%
4%
%

4%
10%

3%
12%

2%
14%

2%
14%

1%
11%

0.114
%
12%

1%
16%

1%
14%

Less: Financial Expenses

Net Profit/(Loss) before tax
Less: Provision for income tax (5% on
Credit Sales)
Net Profit/(Loss) after tax

2%
9%

2%
10%

3%
13%

3%
12%

4%
4.76
%

4%
5.63
%

4%
8.61
%

4%
7.31
%

Table: 3.2.1: Statements of Comprehensive Income of Robin Printing and Packages Ltd.
Source: Vertical Analysis of Financial Statement of Paper Board Unit (From June-2011 to June-2014)

Vertical Analysis of Gross Turnover to COGS

Chart: 3.2.1: Vertical Analysis of Gross Turnover to COGS

Analysis and Interpretation:

So here above the Table (3.2.1) & Chart 3.2.1 we find that in 2011 Cost of Goods
Sold of Robin Printing and Packages Ltd. was 85 % of Gross Turnover. Here gross
turnover was 100%. That means Cost of Goods Sold is more. It may generate less
profit. In 2012 also Cost of Goods Sold was 85% so it also more. In this year COGS
moves down that were almost 84 %. This scenario is good for company. So Company
may generate more profit than previous year. In 2014 again COGS was 84 %. So this
year also Company may generate profit.

Comments:
Above the Table (3.2.1) & Chart 3.2.1 shows that COGS in 2011 was 85% that is not
good for the company because High COGS resulting less Profit. If we consider 2011
was base year (100%) then in 2012 COGS was same. But in 2013 COGS was

improved that was almost 84% so in 2013 company may earn more Gross Profit.
Finally In 2014 COGS is 84%.so this is good for the company for generating profit.
Vertical Analysis of COGS to Gross Profit

Chart: 3.2.2: Vertical Analysis of COGS to Gross Profit

Analysis and Interpretation:

So here above the Table 3.2.1 & Chart 3.2.2 we find that in 2011 Cost of Goods Sold
of Robin Printing and Packages Ltd. was more than 85 % of Gross Turnover and
Gross Profit 14.53%. Here gross turnover was 100%. It generates less profit. In 2012
also Cost of Goods Sold was 85% and Gross Profit 14.94 % so it also less. In 2013
COGS moves down that were almost 84 % and Gross Profit moves up to 16.24%.
This scenario is good for company. So Company may generate more profit than
previous year. In 2014 again COGS was 84 %and Gross profit 15.84%. So this year
also Company may more generate profit.

Comments:
Above the Table (3.2.1) & Chart 3.2.2 shows that Gross Profit in 2011 was 14.53%. If
we consider 2011 was base year (100%) then in 2012 Gross Profit was 14.94% so it
increase profit than previous year. But in 2013 Gross Profit was improved that was
almost 16.24% so in 2013 company earn more Gross Profit than 2011&2012. Finally
In 2014 Gross Profit is 15.84%. So this company improves their Gross Profit year by
year.

Vertical Analysis of Gross Turnover to Profit Operation

Chart: 3.2.3: Vertical Analysis of Gross Turnover to Profit Operation

Analysis and Interpretation:

So here above the Table 3.2.1 & Chart 3.2.3 we find that in 2011 Profit from
Operation of Robin Printing and Packages Ltd. was 10 % of Gross Turnover. Here
gross turnover was 100%. In 2012 Profit from Operation was 12 % so it increased. In
2013 & 2014 Profit from Operation again increased to 14%. This scenario is good for
company. So Company generates more operating profit than previous year.

Comments:
Above the Table 3.2.1 & Chart 3.2.2 shows that Profit from Operation in 2011 was
10%. If we consider 2011 was base year (100%) then in 2012 Profit from Operation
was 12% so it increase profit than previous year. And in 2013 Profit from Operation
was improved that was almost 14% so in 2013 company earn more Profit from
Operation than 2011&2012. Finally In 2014 Gross Profit also increased 14%. So this
company improves their Profit from Operation year by year.

Vertical Analysis of Gross Turnover to EBT

Chart: 3.2.4: Vertical Analysis of Gross Turnover to EBT

Analysis and Interpretation:

So here above the Table 3.2.1 & Chart 3.2.4 we find that in 2011 Gross Turnover to
EBT of Robin Printing and Packages Ltd. was 9 % of Gross Turnover. Here was
Gross Turnover 100%. In 2012 Profit from Operation was 10 % so it increased. In
2013 EBT again increased to 13%. So Company generates EBT than previous year.
This scenario is good for company. But in 2014 EBT decreased to 12%.So Company
need to more careful about the EBT and try to improve for next year.

Comments:
Above the Table 3.2.1 & Chart 3.2.4 shows that Earnings before tax in 2011 were 9%.
If we consider 2011 was base year (100%) then in 2012 Earnings before tax was 10%
so it increased profit than previous year. And in 2013 Earnings before tax was
improved that was almost 13% so in 2013 company earn more Profit than
2011&2012. Finally In 2014 Earnings before tax decreased to 12%. So this company
improves their Profit.

Vertical Analysis of the Balance Sheet

The central issue when creating a vertical analysis of a balance sheet is what to use as
the denominator in the percentage calculation. The usual denominator is the asset
total, but you can also use the total of all liabilities when calculating all liability line
item percentages, and the total of all equity accounts when calculating all equity line
item percentages.