ists of the study of a single financial statement in which each item is expressed as a percentage of a significant total. Vertical analysis is especially helpful in analyzing income statement data such as the percentage of cost of goods sold to sales. Where horizontal analysis looked at one account at a time, vertical analysis will look at one YEAR at a time. Financial statements that show only percentages and no absolute dollar amounts are common-size statements. All percentage figures in a common-size balance sheet are percentages of total assets while all the items in a common-size income statement are percentages of net sales. The use of common-size statements facilitates vertical analysis of a company's financial statements. The calculation for common-size percentages is: (Amount / Base amount) and multiply by 100 to get a percentage. On the balance sheet the base is total assets and on the income statement the base is (net) sales. 3. Revenue and expense data for the current calendar year for Tannenhill Company and for the electronics industry are as follows. The Tannenhill Company data are expressed in dollars. The electronics industry averages are expressed in percentages. Prepare a common-sized income statement comparing the results of operations for Tannenhill Company with the industry average. Prepare a common-sized income statement comparing the results of operations for Tannenhill Electronics Company with the industry average. Tannenhill Tannenhill Electronics Electronics Electronics Industry Company Company Average How does Tannenhill Company Compare to Industry Average? Amount Percent Sales $4,500,000 100% Cost of goods sold 2,345,000 57% favorable/unfavorable Gross profit $2,155,000 43% favorable/unfavorable Selling expenses $940,000 24% favorable unfavorable Administrative expenses 790,000 Total operating expenses $1,730,000 13% favorable unfavorable 37% favorable unfavorable Income from operations $425,000 6% favorable unfavorable