Introduction
Understanding your company’s financial performance starts with mastering Vertical Analysis in Excel. This powerful method allows finance professionals to evaluate each line item in a financial statement as a percentage of a base figure—typically total revenue or total assets. In this guide, we’ll show you how to perform vertical analysis step-by-step, using our free downloadable Excel template, built with real manufacturing data for May 2025.
When performed in Excel, vertical analysis becomes not just insightful but also interactive and scalable. With a structured template, financial professionals can monitor performance, identify trends, and instantly interpret cost efficiency across months or years.
In this guide, you’ll learn everything about Vertical Analysis in Excel — including a free downloadable template designed for a manufacturing company (May 2025). You’ll see how to interpret results, automate calculations, and even extend this analysis using PivotXL for real-time financial automation.
What Is Vertical Analysis?
Vertical Analysis, also known as common-size analysis, is a method of expressing financial statement items as a percentage of a base amount.
It helps normalize the data — allowing comparison across time periods, departments, or even different companies of varying sizes.
For example:
- In an Income Statement, each item (like COGS, operating expenses, or net profit) is represented as a percentage of total sales.
- In a Balance Sheet, each asset and liability is expressed as a percentage of total assets.
Formula for Vertical Analysis
Vertical Analysis % = (Individual Item ÷ Base Amount) × 100Example:
If Total Sales = ₹1,00,000 and COGS = ₹60,000
then,
COGS % = (60,000 / 1,00,000) × 100 = 60%
This means 60% of your sales revenue is spent on cost of goods sold.
Why Vertical Analysis Matters
Vertical Analysis brings several strategic benefits:
- Simplifies Comparisons: It standardizes figures, making comparisons across periods easier even if total sales differ.
- Highlights Cost Structure: Helps you see where your company spends the most and where margins can improve.
- Improves Communication: Expressing data in percentages is easier for stakeholders and executives to interpret.
- Aids Benchmarking: You can compare your firm’s cost structure with competitors or industry standards.
Performing Vertical Analysis in Excel
Excel provides a perfect platform for financial statement analysis — combining flexibility, accuracy, and automation.
Our Vertical Analysis Excel Template links your Profit & Loss statement and automatically calculates each line item’s percentage of total revenue.
Let’s break it down step-by-step.
1: Input Base Financial Data
In the template, you’ll find a P&L sheet for the manufacturing company for May 2025.
The structure includes:
| Account Head | Amount (₹) | Vertical % |
|---|---|---|
| Sales Revenue | 1,00,000 | 100.00% |
| Cost of Goods Sold | 60,000 | 60.00% |
| Gross Profit | 40,000 | 40.00% |
| Operating Expenses | 15,000 | 15.00% |
| Net Profit | 25,000 | 25.00% |
Each “Vertical %” cell uses the formula:
= (Amount / Total Sales) * 100
2: Link to Base Cell
To ensure accuracy, we link the base amount (Total Sales) dynamically so that if the value changes, all vertical percentages update automatically.
Example Excel formula:
= B3 / $B$3
Where:
B3= value of each item$B$3= absolute reference to Total Sales
This structure ensures your analysis remains consistent even when new data is added.
3: Apply Formatting
To make the report professional:
- Use percentage format (0 or 2 decimals).
- Apply conditional formatting to highlight cost-heavy items (>60% of sales).
- Include data bars or charts for visual trend analysis.
This template already includes these pre-built formatting rules to save time.
Example: Manufacturing Company (May 2025)
Let’s interpret real data using the included template for a manufacturing business.
| Account Head | Amount (₹) | Vertical % |
|---|---|---|
| Total Revenue | 2,500,000 | 100.00% |
| Raw Materials | 1,200,000 | 48.00% |
| Direct Labor | 600,000 | 24.00% |
| Factory Overheads | 300,000 | 12.00% |
| Operating Expenses | 250,000 | 10.00% |
| Net Profit | 150,000 | 6.00% |
From this analysis:
- Raw materials and labor account for 72% of total revenue — indicating a production-cost-heavy structure.
- Operating expenses are at 10%, suggesting good administrative cost control.
- Net profit margin (6%) can be improved through procurement efficiency or automation.
Benefits of Using Vertical Analysis
1. Clarity and Simplicity
Transforming raw numbers into percentages provides instant clarity. Even non-financial managers can interpret where the money goes.
2. Improved Benchmarking
You can compare performance between months, years, or departments without worrying about changes in absolute sales values.
3. Trend Analysis
When extended across multiple periods, vertical analysis highlights how cost structure evolves over time.
4. Supports Decision-Making
Helps CFOs and finance teams spot inefficiencies and prioritize cost optimization initiatives.
Limitations of Vertical Analysis
While it’s powerful, vertical analysis has some limitations:
- It does not reflect growth or decline over time — for that, horizontal analysis is required.
- It assumes that the base amount (like sales) is accurate; errors here affect the entire analysis.
- It doesn’t capture external market factors or inflation adjustments.
Hence, it’s best used alongside Horizontal Analysis and Ratio Analysis for comprehensive insight.
Vertical Analysis in Excel Template Overview
This free Excel template includes:
- Sheet 1: Input (P&L Data) – Base data for May 2025 (editable).
- Sheet 2: Vertical Analysis View – Automatically calculates and visualizes the vertical percentages.
- Sheet 3: Chart Dashboard – Displays visual trends of cost components and profitability.
You can easily adapt it for monthly, quarterly, or yearly data.
Download the Free Template
Next Step: Automate It with PivotXL
While Excel is excellent for analysis, manually updating data every month is time-consuming and error-prone.
That’s where PivotXL steps in — automating financial reporting directly from your data sources.
PivotXL Advantages:
- Auto-Updating Templates: Connect live data (from ERP, accounting, or CRM tools) so vertical analysis updates instantly.
- Dynamic Dashboards: Create real-time visuals that show cost structures and profitability ratios.
- Collaboration Ready: Teams can access the same dynamic sheet, eliminating version-control chaos.
- Accuracy & Consistency: Removes human error from formula-based calculations.
This means your finance teams can focus on insights instead of manual updates, freeing time for strategic decisions.
Conclusion
Vertical Analysis is one of the most fundamental yet powerful tools for financial understanding.
By converting your financial statement into percentages of a base value, you can quickly assess performance, detect inefficiencies, and communicate results effectively.
With our free Excel template, you can start performing accurate vertical analysis for your business today.
And with PivotXL, you can take it a step further — automating updates, improving collaboration, and ensuring financial clarity every day.
