In the above example cost of sales were 52%

of total sales. Similarly, General and

Administrative expenses are 30% of total
sales.
Company has not performed very well in
controlling cost of sales expenses as it were
41% last year and increased in current year
by 11% (to 52%). Company need to recheck
its cost of sales controls.

On the other hand company has performed

better in reducing other operating expenses
which are now only 6% as compared to last
years of 11%.
Finance costs has reduced from last year but
we can clearly see that finance cost is not a
major expense and therefore do not impact
much on current years performance. This
also indicates that either the companys
borrowings are low or is capitalized in some
other assets of the company.
By comparing vertically (thus the name
vertical analysis) we have extracted
meaningful information about the
performance of the company. Statement of
financial position is interpreted in the same
manner.
In external comparison the performance of
the company is compared with other
companies or industry averages. For example
52% cost of sales is compared with industry
average which suppose is 40%, then
definitely company is not performing well and
company should seriously take into account
the measures for its cost of sales and vice
versa.