Practical Tips in Assessing the Financial Statement:

(Vertical Analysis)

1. The percentage of allocation assets form is disclosed in the common-size statement of financial
position and the percentage show the account to another and compared with competitors
belonging in the same industry.

2. This method will show the firm’s capital structure by presenting the percentage allocation of
assets in terms of how much percent was barrowed and how much percent the owners
invested.

3. For working capital analysis the current asset percentage may be compared with the current
liabilities percentage to ascertain the firm’s liquidity or solvency.

4. 9The percentage will present the relationship of sales and the other income statement. The
cost of goods sold ratio, and gross profit ratio, net profit ratio is the salient ratios using the
common-size statement. The longitudinal analysis of ratios can help management to improve
the cost and expenses and revenue.

Below is an illustrative example of a common-size of comparative statement of financial position

using Riel Corporation’s financial statement.

Riel Corporation
Common-Size Comparative Statement of Financial Position
December 31, 2024 and 2025

COMMON SIZE

PERCENTAGES

2025 2024 2025 2024

Assets

Current Assets

Cash & Cash Equivalent 106,798 102,375 10.53 10.59

Trade & Other Receivable 327,611 277,467 32.31 28.71

Inventory 334,863 297,654 33.02 30.80

Prepaid Expenses 101,565 114,813 10.02 11.88

Total Current Assets 870,828 792,309 85.87 81.99

Noncurrent Assets

Property, Plant, & Equipment 135,754 166,481 13.39 17.23

Intangibles 7,500 7,500 0.74 0.78

Total Noncurrent Assets 143,254 173,981 14.13 18.01

Total Current Assets 1,014,082 966,290 100.00 100.00

Liabilities and Shareholder’s Equity

Current Liabilities

Trade & Other Payables 238,000 208,703 23.47 21.60

Unearned Revenues 107,508 82,456 10.60 8.53

Notes Payable – Current 45,000 45,000 4.44 4.66

Total Current Liabilities 390,508 336,159 38.51 34.79

Noncurrent Liabilities

Notes Payable – noncurrent 208,422 253,500 20.55 26.23

Total Liabilities 598,930 589,659 59.06 61.02

Shareholder’s Equity

Preference Share

P100 par 105,000 105,000 10.35 10.87

Ordinary Share’s, P1 par 15,000 15,000 1.48 1.55

Premium on Ordinary Shares 135,000 135,000 13.31 13.97

Total Paid on Capital 255,000 255,000 25.15 26.39

Retained Earnings 160,152 121,631 15.79 12.59

Total Shareholder’s Equity 415,152 376,631 40.94 38.98

TOTAL LIABILITIES & SHAREHOLDE’S EQUITY 1,014,082 966,290 100.00 100.00

Riel Corporation
Common-Size Comparative Statement of Financial Position
December 31, 2024 and 2025

COMMON SIZE

PERCENTAGE

2025 2024

Assets

Current Assets

Cash & Cash Equivalent 10.53 10.59

Trade & Other Receivables 32.31 28.71

Inventory 33.02 30.80

Prepaid Expenses 10.02 11.88

Total Current Assets 85.87 81.99

Noncurrent Assets

Property, Plant, & Equipment 13.39 17.23

Intangibles 0.74 0.78

Total Noncurrent Assets 14.13 18.01

TOTAL ASSETS 100.00 100.00

Liabilities and Shareholder’s Equity

Current Liabilities

Trade & Other Payables 23.47 21.60

Unearned Revenues 10.60 8.53

Notes Payables – current 4.44 4.66

Total Current Liabilities 38.51 34.79

Noncurrent Liabilities

Notes Payables – noncurrent 20.55 26.23

Total Liabilities 59.06 61.02

Shareholders’ Equity

Preference Shares

P100 par 10.35 10.87

Ordinary Shares P1 par 1.48 1.55

Premium on Ordinary Shares 13.31 13.97

Total Paid-in-Capital 25.15 26.39

Retained Earnings 15.79 12.59

Total Shareholders’ Equity 40.94 38.98

TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY 100.00 100.00

 Riel Corporation
Common-Size Income Statement
For the years ended December 31, 2024 and 2025

COMMON SIZE

PERCENTAGES

2025 2024 2025 2024

Sales 3,007,887 2,732,712 100.00 100.00

Less: Cost of good sold 2,208,520 1,964,865 73.42 71.90

Gross Profit 799,367 767,847 26.58 28.10

Less: Selling Expenses 372,000 345,000 12.37 12.62

Administrative Expenses 207,000 213,000 6.88 7.79

Total Operating Expenses 579,000 558,000 19.25 20.42

Operating Income 220,367 209,847 7.33 7.68

Less: Interest Expenses 41,860 43,905 1.39 1.61

Net Income before taxes 178,507 165,942 5.93 6.07

Less: Income Tax 62,477 58,080 2.08 2.13

Net Income after Taxes 116,030 107,862 3.86 3.95

Riel Corporation
Common-Size Income Statement
For the years ended December 31, 2024 and 2025

COMMON SIZE

PERCENTAGES

2025 2024

Sales 100.00 100.00

Less: Cost of good sold 73.42 71.90

Gross Profit 26.58 28.10

Less: Distribution Costs 12.37 12.62

Administrative Expenses 6.88 7.79

Total Operating Expenses 19.25 20.42

Operating Income 7.33 7.68

Less: Interest Expenses 1.39 1.61

Net Income before taxes 5.93 6.07

Less: Income Tax 2.08 2.13

 Net Income after Taxes 3.86 3.95

Financial Statement Analysis – Riel Corporation

Vertical Analysis

The assessment of the statement of financial position using vertical analysis reveals the
following:

Statement of Financial Position

The common-size statement has both periods of the firm’s current assets. The analysis
statement of the current assets made up for inventory (33.02%) and second by receivable
(32.31%). Inventory has a least liquid under the current assets category. The analyst must have
to account a proportion. The growth increased for receivable percentage to be accounted for
the sale revenue.

The decrease in percentage allocation for property, plant, and equipment has been noted. It can
caused by depreciation, mentioning the management, if the circumstances call for it.

The liability percentage (59.06%) is higher than the shareholder’s equity percentage (40.94%).
That means that the assets were financed by borrowing. The liabilities in 2024 (61.02%) to 2025
(59.06%) has been decreased, it indicates that the firm is shifting to dependence of financing
from borrowing to use the owner’s investment. This can indicates of its long-term of financial
position.

The owner’s equity is considered as the margin of the safety by the creditors. Creditors are
happy when the owner’s equity is high. The amount of the owner’s equity can absorb the
declined assets. If the assets of the company decline, the owner’s equity is the amount that can
be used to pay the creditors.

Income Statement

The high percentage in CGS (73.42%) was notice for not favorable to sales. The sales revenue is
used to cover the cost of selling. The horizontal analysis, management was determine to
establish measures of the remedy. The gross profit ratio decreased in 2025 (26.58%) compared
in 2024 (28.10%). This also increase in the cost of goods sold ratio.

The operating expenses ratio is favorable of firm has decreased. The firm’s efficiency is indicates
in controlling the operating expenses. The net income ratio (3.86%) is favorable indicates in the
company earned year. The analysis was indicate to the decreased net income ratio. The CGS
ratio, increased was accounted for unfavorable, It’s too high to be offset for favorable result
from the decreased in operating expenses ratio.

Implications to Financial Management

Based from the analyses, interpretations, and conclusions, the following implications
may be culled:
1. The company’s cycle movement is slow due to conversion and receivable needs.
Improve the new policies to encourage the receivable. The receivable was establish in a
strict and assertive measure to increase the new strategies of inventories need.
 2. The firm’s capital structure leaning toward equality due to company’s favorable of
operation is maintained. The balance between liabilities and owner’s equity has both
potential creditors and owners.
3. Lower the measure of cost and goods to increase the sales revenue to cover CGS issues
must be drawn as soon as possible. This would help improve the 7.75% growth of net
income for the succeeding periods. Improve the measures of cost and expenses and
make sure the measure is strictly implemented.
4. There is a need to consistently monitor implementation of measures and policies to
assure continuous improvements of said measures and implementation procedures.

TREND ANALYSES

The longitudinal modification of horizontal and vertical trend analysis. The percentage has
change for several successive of two-year period horizontal analysis. The two-year period
horizontal analysis is the present long run of the company’s progression.

The bas period amounts (oldest year) is 100% written. The percentage of each account is the
statement computed by dividing each amount by the base year figure. Comparing the
percentage relationship base on the trends, interpretation, conclusion and implication may be
drawn.