Horizontal and Vertical analysis are two of the methods used by the finance analysts to determine the financial health of company. These two approaches are used to tell the users of these financial analyses how well the company is performing in terms of its own performance from one period to another. It immediately tells the analysts if there has been any performance decline in the company from one year to another. Vertical analysis tells each item in the balance sheet as a percentage of total assets. For e.g. if account receivables are $25,000 and total assets are $100,000, then accounts receivable will be quoted as 25%. If next year, this percentage goes up or down then it will let the analysts know that there has been alteration in the financial health of the company. Similarly, in the income statements, each items is expressed as a percentage of sales. For example, if total sales are $100,000 and Cost of Goods Sold is $25,000, then Cost of Goods Sold will be represented as 25%.
Horizontal analysis is used for analysis from one period to another. It takes into account the value of item the previous years, and how much it has changed in the next years. For example, if sales are reported to be $100,000 in 2013, and increased to $125,000 in the year 2014, then the horizontal analysis will show the sales as 100% in the year 2013, and 125% in the year 2014 showing a 25% increase (assuming we have taken 2013 as a base year). Horizontal analysis is carried out for all the items in the balance sheet and income statement to find out whether or not the company is growing, declining or is stagnant.
Horizontal And Vertical Analysis Essay Examples
Cite this page
Choose cite format:
- APA
- MLA
- Harvard
- Vancouver
- Chicago
- ASA
- IEEE
- AMA
WowEssays. (2020, March, 10) Horizontal And Vertical Analysis Essay Examples. Retrieved November 22, 2024, from https://www.wowessays.com/free-samples/horizontal-and-vertical-analysis-essay-examples/
"Horizontal And Vertical Analysis Essay Examples." WowEssays, 10 Mar. 2020, https://www.wowessays.com/free-samples/horizontal-and-vertical-analysis-essay-examples/. Accessed 22 November 2024.
WowEssays. 2020. Horizontal And Vertical Analysis Essay Examples., viewed November 22 2024, <https://www.wowessays.com/free-samples/horizontal-and-vertical-analysis-essay-examples/>
WowEssays. Horizontal And Vertical Analysis Essay Examples. [Internet]. March 2020. [Accessed November 22, 2024]. Available from: https://www.wowessays.com/free-samples/horizontal-and-vertical-analysis-essay-examples/
"Horizontal And Vertical Analysis Essay Examples." WowEssays, Mar 10, 2020. Accessed November 22, 2024. https://www.wowessays.com/free-samples/horizontal-and-vertical-analysis-essay-examples/
WowEssays. 2020. "Horizontal And Vertical Analysis Essay Examples." Free Essay Examples - WowEssays.com. Retrieved November 22, 2024. (https://www.wowessays.com/free-samples/horizontal-and-vertical-analysis-essay-examples/).
"Horizontal And Vertical Analysis Essay Examples," Free Essay Examples - WowEssays.com, 10-Mar-2020. [Online]. Available: https://www.wowessays.com/free-samples/horizontal-and-vertical-analysis-essay-examples/. [Accessed: 22-Nov-2024].
Horizontal And Vertical Analysis Essay Examples. Free Essay Examples - WowEssays.com. https://www.wowessays.com/free-samples/horizontal-and-vertical-analysis-essay-examples/. Published Mar 10, 2020. Accessed November 22, 2024.
Copy