Vertical Analysis of Lori's Boutique, Inc. Balance Sheet December 31, 2018

What does the Vertical Analysis of Lori's Boutique, Inc.'s Balance Sheet December 31, 2018 indicate?

Vertical Analysis Overview

The Vertical Analysis of Lori's Boutique, Inc.'s Balance Sheet on December 31, 2018 provides a detailed breakdown of the proportionate representation of each asset, liability, and equity item in relation to the total assets. This analysis allows us to understand the relative importance of each component in the overall financial structure of the company.

Understanding the Vertical Analysis

Vertical analysis is a valuable financial analysis technique that compares individual items on a balance sheet to the total figure. In this case, the analysis helps us evaluate the composition of Lori's Boutique, Inc.'s assets, liabilities, and equity. By examining the vertical analysis, stakeholders can gain insights into the company's financial health and structure.

For instance, if current assets constitute a significant portion of the total assets in the vertical analysis, it indicates that Lori's Boutique has a strong liquidity position. On the other hand, if long-term debt makes up a large percentage of total liabilities, it might suggest a higher risk profile for the company. Understanding these proportions is crucial for assessing the company's financial position.

Vertical analysis is a useful tool for identifying trends, comparing different periods, and making informed decisions based on the relative importance of various financial elements. It provides stakeholders with a clear picture of the company's financial position, enabling them to make strategic decisions.