Vertical Analysis of Zeta Designs, Inc. Balance Sheet
Understanding Vertical Analysis
Vertical analysis is a financial analysis technique in which each line item on a company's financial statement is expressed as a percentage of another item on the same financial statement. A vertical analysis of the balance sheet for each year indicates that current assets are the biggest category, accounting for 34.75 percent of total assets in Year 1 and 34.75 percent of total assets in Year 2.
Vertical Analysis of Zeta Designs' Balance Sheet
Vertical Analysis of Zeta Designs' balance sheet for each year reveals interesting insights into the financial health of the company. Let's take a closer look at the data:
| Category | Year 1 | Year 2 | Change | % Change |
|---|---|---|---|---|
| Total Current Assets | $49,000 | $39,000 | $10,000 | 25.64% |
| Long-term Investments | $22,000 | $28,000 | ($6,000) | -21.43% |
| Property, Plant, and Equipment | $70,000 | $55,000 | $15,000 | 27.27% |
| Total Assets | $141,000 | $122,000 | $19,000 | 15.57% |
From the vertical analysis, it is clear that Zeta Designs' total current assets decreased by 25.64% from Year 1 to Year 2. However, long-term investments increased by 27.27% over the same period. This shift in asset composition can have implications on the overall financial stability and growth prospects of the company.
Implications on Liabilities and Stockholders' Equity
On the liability side, current liabilities decreased by 27.27% from Year 1 to Year 2, while long-term debt increased by 11.11%. Stockholders' equity saw a significant increase of 25.76% over the same period. This indicates a positive trend in the company's financial health and shareholder value.
What are the key takeaways from the vertical analysis of Zeta Designs, Inc.'s balance sheet? The key takeaways from the vertical analysis of Zeta Designs' balance sheet include: - Current assets are the biggest category, consistently accounting for around 34.75% of total assets in both years. - Long-term investments saw a significant decrease in Year 2. - Property, plant, and equipment experienced a notable increase in both absolute value and percentage change. - Stockholders' equity showed substantial growth, reflecting positively on the company's financial health and shareholder value.