![]() For example, a business may compare cash to total assets in the current year. Vertical analysis shows a comparison of a line item within a statement to another line item within that same statement. ![]() ![]() Using Mistborn Trading (MT) as our example, if MT wanted to compare Revenue in the current year (year of analysis) of $120,000 to the prior year (base year) of $100,000, the dollar change would be as follows:ĭollar change = $120,000 – $100,000 = $20,000 The dollar change is found by taking the dollar amount in the base year and subtracting that from the year of analysis. The year of comparison for horizontal analysis is analysed for dollar and percent changes against the base year. The year being used for comparison purposes is called the base year (usually the prior period). If multiple periods are not used, it can be difficult to identify a trend. It is most valuable to do horizontal analysis for information over multiple periods to see how change is occurring for each line item. The trending of items on these financial statements can give a business valuable information on overall performance and specific areas for improvement. For example, a business may compare sales from their current year to sales from the prior year. A business will look at one period (usually a year) and compare it to another period. ![]() Horizontal analysis (also known as trend analysis) looks at trends over time on various financial statement line items. ![]()
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