Suppose in 20012 total equity and liabilities for a business amounted to $600,000 and total liabilities amounted to $400,000. The following year, total equity and liabilities increased to $700,000 while liabilities increased to $450,000. According to the vertical analysis method, has the financial situation become better or worse?

• Better because total equity reduced as a percentage of total equity and liabilities.
•  Better because total liabilities increased faster than total equity and liabilities
• Better because the company was able to finance its operations with more debt
• Better because the total liabilities reduced as a percentage of total equity and liabilities.

Answer rating: 100% (QA)

Solution In the given Problem If we do vertical an... View the full answer