These reports are usually presented to top management as one of their bases in making business decisions.
[1] For example, a group of items can be expressed as a percentage of net income.
When proportionate changes in the same figure over a given time period expressed as a percentage is known as horizontal analysis.
[2] Vertical or common-size analysis reduces all items on a statement to a "common size" as a percentage of some base value which assists in comparability with other companies of different sizes.
[3] As a result, all Income Statement items are divided by Sales, and all Balance Sheet items are divided by Total Assets.