What does vertical analysis express in a report?

Vertical analysis is a financial analysis method that expresses each item in a financial statement as a percentage of a base figure, providing a way to evaluate relative size and composition. For example, in the income statement, each line item (like costs and expenses) is often expressed as a percentage of total sales. This method allows stakeholders to easily compare individual components of financial statements within the same period, providing insights into cost structure and profit margins.

The other options relate to different forms of analysis. For instance, yearly trends involve examining data over multiple periods, while budgeted versus actual comparisons assess performance against forecasts. Variances between departments would analyze performance discrepancies within an organization, but none of these are the focus of vertical analysis, which is specifically about expressing financial figures as percentages relative to a base amount.