Vertical analysis is the analysis technique in which individual line items are compared against the total amounts. i.e. Individual asset equity and liabilities line items on balances sheet are analyzed as a percentage of total balance sheet. In case of profit and loss accounts, all line items are analyzed as a percentage of the Sales/ Revenue.
Vertical Analysis provides us a measure of the size of individual line items and the impact they might bring on the overall balance sheet and profit & loss account.
Horizontal analysis of balance sheet and profit & loss account based on the above data would be as follows: