What is usually true about vertical analysis?

Vertical analysis is a financial analysis method that involves evaluating each line item in a financial statement as a percentage of a base amount within the same statement. When looking at an income statement, for instance, individual items such as expenses and revenues are expressed as a percentage of total sales or total revenue. This allows for an easy comparison of various components of financial statements relative to the overall performance, making it clear how much each item contributes to total sales.

In contrast, the other options describe aspects that do not align with the fundamental principles of vertical analysis. For example, assessing multi-year trends typically falls under horizontal analysis, where financial data is compared across multiple periods. Additionally, vertical analysis is not limited to profit statements; it can be applied to balance sheets and cash flow statements as well. Lastly, vertical analysis does not inherently require prior financial data since it analyzes data from a single financial statement at a time, focusing on the relationship of individual items to the total within that specific statement.