What is vertical analysis also known as?

Vertical analysis is commonly referred to as common-size analysis because it involves expressing each item in a financial statement as a percentage of a base figure. For instance, in an income statement, each line item is typically shown as a percentage of total revenue, while in a balance sheet, each item is represented as a percentage of total assets. This method allows for easier comparison of financial data across time periods, companies, and industries, as it standardizes the figures, making them easier to interpret and analyze.

Common-size analysis is particularly useful for assessing a company's financial position and performance over time, as it highlights the relative significance of each component of a financial statement, rather than focusing solely on the absolute values. This approach helps finance professionals, analysts, and stakeholders identify trends and make comparisons that are not as apparent when looking solely at raw data.