Horizontal and Vertical Analysis | Accounting
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Horizontal analysis is also known as Trend Analysis refers to studying the behavior of individual financial statement items over several accounting periods. The Vertical Analysis concentrates on the relationships between various financial items on a financial statement. Copy the link given below and paste it in new browser window to get more information on Horizontal and Vertical Analysis:- http://www.transtutors.com/homework-help/accounting/horizontal-and-vertical-analysis.aspx
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Financial Statement Analysis
This document discusses financial statement analysis, which involves reviewing a company's financial statements like the income statement, balance sheet, and cash flow statement to assess the company's financial health and performance over time and relative to other companies. Key aspects of financial analysis include evaluating profitability, solvency, liquidity, and stability using tools like ratio analysis, comparative statements, common size statements, and trend analysis. The results of financial analysis are used by various interested parties like management, investors, and creditors to evaluate financial performance, position, operating efficiency, and predict future performance.
Analysis & interpretation of financial statements
This document discusses various methods for analyzing financial statements, including ratios to evaluate profitability, liquidity, and returns. It defines key ratios like stock turnover, gross/net profit percentages, current ratio, acid test ratio, and return on investment. These ratios are used to analyze aspects of the business like profit results, financial status, working capital, and mark-up/margin. Calculating and interpreting these ratios provides meaningful insights about the business's performance and financial health.
Financial statement analysis
Financial statement analysis involves analyzing a company's financial statements to assess its performance and financial position. It is used to evaluate factors like profitability, solvency, liquidity, and efficiency. Key tools for financial statement analysis include financial ratios, common size analysis, trend analysis, and comparisons to industry standards and past performance. The purpose is to provide useful information to decision makers about a company's historical performance, current condition, and future prospects.
Profitability, Liquidity and Solvency
The document discusses ratio analysis and financial statement analysis techniques for evaluating a company's profitability, liquidity, and solvency based on its balance sheet and income statement. It provides the financial statements of Elevation Sports, Inc. for May 31, 2004 to demonstrate calculating financial ratios to measure the company's performance in these three areas.
Financial statement analysis
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Financial Statement Analysis
The document outlines key aspects of a course on financial statement analysis, including:
- The course will cover the nature, purpose, and methods of financial statement analysis as well as ratio analysis and its importance.
- Students will learn about the objectives, users, and limitations of financial statement analysis to better evaluate the financial position and performance of companies.
- The course will help students understand various liquidity, profitability, and debt ratios and be able to classify accounting ratios to assess companies' financial health for decision making.
Branches of accounting
There are several branches of accounting:
1) Financial accounting focuses on external users and communicating economic activities through financial statements.
2) Management accounting emphasizes preparing and analyzing internal accounting information to support decision making.
3) Government accounting records and reports on government fund receipts, spending, and asset/liability transactions and events.
4) Tax accounting helps with tax planning, preparation, and compliance to minimize taxes legally.
Financial Statements
Financial statements are formal records that evaluate a company's financial stability, performance, and liquidity. There are three main financial statements:
1) The income statement shows profits/losses over time.
2) The balance sheet presents assets, liabilities, and equity on a given date.
3) The cash flow statement shows cash inflows and outflows from operating, investing, and financing activities over time.
Together these statements provide useful information to investors and management, while also having some limitations since they only represent past performance and financial snapshots versus future potential.
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This document discusses financial statement analysis, which involves reviewing a company's financial statements like the income statement, balance sheet, and cash flow statement to assess the company's financial health and performance over time and relative to other companies. Key aspects of financial analysis include evaluating profitability, solvency, liquidity, and stability using tools like ratio analysis, comparative statements, common size statements, and trend analysis. The results of financial analysis are used by various interested parties like management, investors, and creditors to evaluate financial performance, position, operating efficiency, and predict future performance.
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This document discusses various methods for analyzing financial statements, including ratios to evaluate profitability, liquidity, and returns. It defines key ratios like stock turnover, gross/net profit percentages, current ratio, acid test ratio, and return on investment. These ratios are used to analyze aspects of the business like profit results, financial status, working capital, and mark-up/margin. Calculating and interpreting these ratios provides meaningful insights about the business's performance and financial health.
Financial statement analysis
Financial statement analysis involves analyzing a company's financial statements to assess its performance and financial position. It is used to evaluate factors like profitability, solvency, liquidity, and efficiency. Key tools for financial statement analysis include financial ratios, common size analysis, trend analysis, and comparisons to industry standards and past performance. The purpose is to provide useful information to decision makers about a company's historical performance, current condition, and future prospects.
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The document discusses ratio analysis and financial statement analysis techniques for evaluating a company's profitability, liquidity, and solvency based on its balance sheet and income statement. It provides the financial statements of Elevation Sports, Inc. for May 31, 2004 to demonstrate calculating financial ratios to measure the company's performance in these three areas.
Financial statement analysis
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Financial Statement Analysis
The document outlines key aspects of a course on financial statement analysis, including:
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- Students will learn about the objectives, users, and limitations of financial statement analysis to better evaluate the financial position and performance of companies.
- The course will help students understand various liquidity, profitability, and debt ratios and be able to classify accounting ratios to assess companies' financial health for decision making.
Branches of accounting
There are several branches of accounting:
1) Financial accounting focuses on external users and communicating economic activities through financial statements.
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3) Government accounting records and reports on government fund receipts, spending, and asset/liability transactions and events.
4) Tax accounting helps with tax planning, preparation, and compliance to minimize taxes legally.
Financial Statements
Financial statements are formal records that evaluate a company's financial stability, performance, and liquidity. There are three main financial statements:
1) The income statement shows profits/losses over time.
2) The balance sheet presents assets, liabilities, and equity on a given date.
3) The cash flow statement shows cash inflows and outflows from operating, investing, and financing activities over time.
Together these statements provide useful information to investors and management, while also having some limitations since they only represent past performance and financial snapshots versus future potential.
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2. branches of accounting
There are several main branches of accounting:
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Financial reporting provides key financial metrics and insights into a company's revenues, expenses, profits, assets, and cash flows. It demonstrates the overall health of a company from a financial perspective. There are three main types of financial reports: the income statement, balance sheet, and cash flow statement. Financial reporting is important as it allows companies to comply with regulations, facilitates audits, and supports financial planning, benchmarking, and decision making for various stakeholders. Overall, financial reporting provides reliable and relevant financial information to stakeholders for purposes such as investment decisions, management accountability, and regulatory compliance.
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Chapter 2.statement of financial position clc
Here are the issues I see with Pete's balance sheet:
1. Drawings should be shown as a reduction to capital, not as an asset.
2. The title should specify it is a balance sheet "as at" December 31, 2005 rather than "for the year ended".
3. The accounting equation is not balanced. Assets should equal the sum of liabilities and capital.
Please let me know if you would like me to review the corrected balance sheet.
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This document discusses key financial statements including the balance sheet, income statement, and statement of cash flows. It provides examples of each statement for a sample company in 2002 and 2001. The balance sheet shows a company's assets, liabilities, and equity at a point in time. The income statement summarizes revenues and expenses over a period of time. The statement of cash flows reports how a company's activities affected cash flow over a given period.
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The document discusses key concepts related to financial reporting including:
1) Financial reporting provides formal records of a company's financial activities primarily for external users like shareholders and internal users like management. Annual reports contain key documents like directors reports and financial statements.
2) There are various forms of business organization but joint stock companies have features like limited liability, transferable shares, and elected management through directors.
3) The objective of financial reporting is to provide useful information to investors and creditors to make decisions about providing resources to an entity. Reports are limited and users need other sources of information as well.
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Types of financial analysis include:
1. Intra-firm comparison analyzes a business's performance over time to identify trends and help management make policy decisions.
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3. Industry average or standard analysis compares a business's actual results to industry standards to evaluate its performance relative to competitors.
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The document discusses financial analysis, which involves critically examining financial statements to understand a firm's financial position and performance. Financial analysis identifies strengths and weaknesses by establishing relationships between balance sheet and income statement items. It has several objectives, including providing reliable financial information to assess a firm's profitability, financial position, and ability to meet obligations. Financial analysis can be conducted internally or externally and has various types depending on the materials used, methodology, entities involved, and time horizon considered. Its limitations include potential to mislead users or make wrong judgments if not done properly.
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Financial reporting provides key financial metrics and insights into a company's revenues, expenses, profits, assets, and cash flows. It demonstrates the overall health of a company from a financial perspective. There are three main types of financial reports: the income statement, balance sheet, and cash flow statement. Financial reporting is important as it allows companies to comply with regulations, facilitates audits, and supports financial planning, benchmarking, and decision making for various stakeholders. Overall, financial reporting provides reliable and relevant financial information to stakeholders for purposes such as investment decisions, management accountability, and regulatory compliance.
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This document discusses various techniques for financial forecasting and projections. It provides an overview of preparing pro forma income statements and balance sheets using percentage of sales and budgeted expense methods. An example pro forma income statement and assumptions are presented. Key points covered are sales forecasting techniques, calculating external funding requirements for growth, and preparing other supporting financial projections like cash budgets and operating budgets.
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The document discusses various responsibilities of financial managers including managing working capital, estimating seasonal needs, long-term financial planning, determining appropriate financing and investment mixes, and determining dividend amounts. It also discusses the interrelationships between financing, investment, and dividend decisions and how changes in one area can impact the others. Various methods of financial statement analysis are described including horizontal analysis, vertical analysis, common-size statements, trend percentages, and ratio analysis. Examples of horizontal analysis are provided comparing the balance sheet and income statement of a company between two years.
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The document discusses key aspects of notes to financial statements according to Philippine Accounting Standards. It explains that notes provide additional narrative descriptions and disclosures to supplement the information in the main financial statements. The notes must be presented systematically and disclose important accounting policies, judgments, estimates, related party transactions, and post-reporting events. The document also provides examples of required note disclosures and the accounting treatment for different types of events and transactions.
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The document discusses financial statement analysis and financial models. It provides an overview of financial statement analysis, including that it involves selecting, evaluating, and interpreting financial data to assess a company's financial condition and performance. It also discusses the objectives of financial statement analysis, the different types of financial statements (income statement, balance sheet, cash flow statement), and methods of analyzing financial statements, including ratio analysis, horizontal analysis, vertical analysis and common-size statements. The document is intended to provide information on financial statement analysis for investors and other stakeholders.
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The document discusses various asset accounts including cash, receivables, inventory, and prepaid expenses. It provides details on what each asset includes, such as cash including cash on hand and in bank accounts, receivables arising from credit sales and loans, inventory for goods held for resale, and prepaid expenses for items paid in advance like insurance. Examples are given for each type of asset to illustrate the accounting concepts.
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Chapter 2.statement of financial position clc
Here are the issues I see with Pete's balance sheet:
1. Drawings should be shown as a reduction to capital, not as an asset.
2. The title should specify it is a balance sheet "as at" December 31, 2005 rather than "for the year ended".
3. The accounting equation is not balanced. Assets should equal the sum of liabilities and capital.
Please let me know if you would like me to review the corrected balance sheet.
12-Basic Financial Statement
This document discusses key financial statements including the balance sheet, income statement, and statement of cash flows. It provides examples of each statement for a sample company in 2002 and 2001. The balance sheet shows a company's assets, liabilities, and equity at a point in time. The income statement summarizes revenues and expenses over a period of time. The statement of cash flows reports how a company's activities affected cash flow over a given period.
Strategic financial management
Strategic financial management refers to both the financial implications of business strategies and the strategic management of finances. It takes a long-term perspective to facilitate growth, sustainability, and competitive advantage. Strategic financial management deals with investment, financing, liquidity, and dividend decisions and applies financial techniques to strategic decision making to help achieve objectives. An effective strategic financial plan considers scenarios, start-up costs, ongoing costs, revenue, objectives, and what the planning process will accomplish for the organization.
Consolidated financial statement
The document provides an overview of consolidated financial statements. It discusses how a parent company combines the financial statements of its subsidiaries by eliminating reciprocal accounts and adjusting for the difference between the parent's cost of its investment and the book value of the subsidiary's underlying equity. The objectives covered include recognizing the benefits of consolidated statements, requirements for inclusion of subsidiaries, allocating excess investment costs, preparing consolidated balance sheets at acquisition and subsequent periods, accounting for minority interests, and preparing consolidated income statements.
Financial reporting presentation_1
The document discusses key concepts related to financial reporting including:
1) Financial reporting provides formal records of a company's financial activities primarily for external users like shareholders and internal users like management. Annual reports contain key documents like directors reports and financial statements.
2) There are various forms of business organization but joint stock companies have features like limited liability, transferable shares, and elected management through directors.
3) The objective of financial reporting is to provide useful information to investors and creditors to make decisions about providing resources to an entity. Reports are limited and users need other sources of information as well.
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Types of financial analysis include:
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3. Industry average or standard analysis compares a business's actual results to industry standards to evaluate its performance relative to competitors.
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This document discusses techniques for analyzing financial statements, including:
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2. Common size statements analysis expresses each financial statement item as a percentage of a common item to show relationships.
3. Trend analysis compares financial statements over several years to analyze a company's past performance and future trends.
4. Ratio analysis describes significant relationships between balance sheet and income statement items.
5. Cash flow analysis examines actual cash inflows and outflows of an organization.
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Types and methods of financial analysis are summarized in 3 sentences:
Financial analysis involves establishing relationships between financial statements to evaluate a firm's financial strength. There are various types of financial analysis classified by user and method, including external analysis by outsiders using published statements and internal analysis by executives having full records access. Common analysis methods examined include comparative statements, trend analysis, common-size statements, and ratio analysis which are used to interpret changes in financial positions and performance over time.
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Financial statements viz. the income and the position statement i.e. the balance sheet, are indicators of two significant factors : profitability and financial soundness. Analysis of statements means such a treatment of the information contained in the two statements as to afford a full diagnosis of the profitability and financial position of the firm concerned.
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This document discusses various techniques for analyzing financial statements, including ratio analysis, trend analysis, common size statements, comparative statements, and funds flow analysis. Ratio analysis involves calculating relationships between financial metrics to evaluate aspects like profitability, liquidity, and leverage. Trend analysis examines changes in financial figures over multiple periods. Common size statements express figures as percentages of totals for comparison. Comparative statements place figures from different periods side by side. Funds flow analysis shows sources and uses of funds. The document provides examples of applying these techniques and discusses their significance for understanding a company's financial condition and performance.
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The document provides information about financial statement analysis. It defines financial statement analysis as the process of evaluating relationships between parts of financial statements to understand a firm's position and performance. It discusses the different types of financial statements and the various users of financial statements, including management, creditors, investors, and government. It also outlines different types of financial analysis, including ratio analysis and comparative statement analysis. Ratio analysis is described as a key tool that establishes relationships between financial metrics to evaluate a firm's liquidity, leverage, activity, and profitability.
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Financial analysis involves assessing business entities, projects, budgets, and forecasts from a financial perspective by analyzing financial statements. It helps with decision making related to investing and financing. External analysis is conducted by outsiders to determine liquidity and ability to generate funds, while internal analysis is done by management to ensure business functions align with goals. The objectives of financial analysis are to determine profitability, financial position, operational efficiency, and future risks and opportunities. Common types of analysis include vertical analysis, horizontal analysis, growth rates analysis, profitability analysis, and liquidity analysis. Financial analysis provides useful insights but has limitations as it relies on historical data and does not consider intangible assets.
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Financial analysis involves assessing business entities, projects, budgets, and forecasts from a financial perspective by analyzing financial statements. It helps with decision making related to investing and financing. External analysis is conducted by outsiders to determine liquidity and ability to generate funds, while internal analysis is done by management to ensure business functions align with goals. The objectives of financial analysis are to determine profitability, financial position, operational efficiency, and future risks and opportunities. Common types of analysis include vertical analysis, horizontal analysis, growth rates analysis, profitability analysis, and liquidity analysis. Financial analysis provides useful insights but has limitations as it relies on historical data and financial statements may contain errors.
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The document provides an overview of financial statement analysis, including the different types of analysis. It discusses internal and external analysis, short-term and long-term analysis, horizontal and vertical analysis. It also defines various accounting ratios used in analysis, such as liquidity ratios, profitability ratios, leverage ratios, and activity/efficiency ratios. Specific types of ratios discussed include the current ratio, debt-to-equity ratio, gross profit margin, and inventory turnover ratio. The document also covers limitations of financial statements and how to prepare horizontal and vertical analyses.
Discuss financial statements- financial statement analysis and ratio a.docx
Discuss financial statements, financial statement analysis and ratio analysis
Discuss financial statements, financial statement analysis and ratio analysis
Solution
The financial statements include income statement, balance sheet, cash flow statement and statement of changes in stockholder\'s equity . The purpose of preparing these financial statements is to ensure that the stakeholders of the company are provided with the correct and reliable information on the operations and financial aspects of the company. These statements are frequently used by various parties for investment purposes and understand growth prospects of the company (by investors), to grant loans (by banks and financial institutions) and for tax related issues (by government and state-tax authorities). Important information as to the ownership of the company, assets and liabilities can also be obtained from the balance sheet of the company. Current cash flow position can also be evaluated with the use of cash flow statement.
Financial statement analysis is performed to evaluate the current financial position of the company. Analysts use techniques such as horizontal, vertical and ratio analysis to determine the financial performance of the company over a particular period. Information for 2 or more periods is compared with the use of these tools to analyze the growth/decline in the company\'s overall financial performance/soundness. It is on the basis of information derived from financial statement analysis, that various decisions relating to investment (in the company) are made by outside parties. The company can also perform such comparisons for investing money in growth and expansion projects.
Ratio analysis is considered as one of the most important tools for financial analysis. Different types of ratios can be calculated to determine the liquidity (short term financial position) and solvency (long term financial position) of the company. Overall profitability and operational efficiency can also be determined with the use of ratios. Various forms of ratios can be calculated and compared with the ratios of other companies within the same industry to determine the company\'s overall financial and operational performance. Calculation and comparision of ratios over a period of years can also provide highly useful results with respect to the profitability and growth of the company.
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Data Analytics for Accounting - Financial Statement Analytics
This document discusses various types of financial statement analytics used in accounting. Descriptive analytics include ratio analysis to evaluate relationships between financial items and assess a company's performance. Vertical analysis shows financial statement items as a percentage of a base figure. Horizontal analysis compares historical financial data year-over-year. Diagnostic analytics use benchmarks to provide context for a company's performance relative to competitors. Predictive analytics aim to forecast future performance. XBRL facilitates computer-readable financial reporting and supports timely financial analysis.
Financial statement analysis
The document summarizes financial statement analysis. It discusses the objectives of financial statements which are to provide information for economic decisions, about financial position, performance, and changes in financial position. It then defines financial statement analysis as studying relationships among factors disclosed in statements. Analysis allows evaluation of a firm's position and performance. Objectives of analysis include judging financial health, profitability, debt capacity, and solvency. Types of analysis include external, internal, horizontal, and vertical. Methods include common size statements, comparative statements, trend ratios, and ratio, funds flow, cash flow, break-even, and value added analysis.
Financial statement analysis
INTRODUCTION TO FINANCIAL STATEMENT ANALYSIS, NEED FOR THW FINANCIAL ANALYSIS, TOOLS FOR FINANCIAL ANALYSIS, INTRESTED PARTIES LIMITATIONS
Accounts - Mod 6 ppt.pptx
The document provides an overview of financial statement analysis. It discusses various types of financial analysis including comparative analysis, common size statements, trend analysis, and ratio analysis. It outlines the objectives and users of financial statement analysis. Some key ratios discussed include current ratio, quick ratio, debt-equity ratio, debtors turnover ratio, and creditors turnover ratio. Methods of analyzing and interpreting financial statements are also presented.
Financial statement analysis by BIJAY KUMAR SHAW
This document discusses financial statement analysis. It defines financial statements as presenting a periodic view of a company's financial progress and status. Financial statements are used by shareholders, creditors, stock exchanges, bankers, management, investors, and governments. Financial statement analysis studies the relationships between financial factors disclosed in statements and trends over time. It can be done externally by outsiders without company access or internally by management. The objectives are to understand the company, identify strengths and weaknesses, check fund movements, measure efficiency, and assess growth potential for comparison. Limitations include relying on user intentions, ignoring qualitative factors, and only using historical data. Common techniques discussed are comparative statements, common size statements, and trend analysis.
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Horizontal and Vertical Analysis | Accounting
- 2. Financial Statement Analysis Financial statement analysis (or financial analysis) is the process of reviewing and analysing a company's financial statements to make better economic decisions Tools of financial statement analysis Horizontal analysis Vertical analysis Ratio analysis Graphical analysis Regression analysis
- 3. Horizontal Analysis Horizontal analysis also known as trend analysis is an analysis of the year-to year change in each financial statement item Horizontal analysis (or trend analysis) refers to studying the behaviour of individual financial statement items over several accounting periods
- 4. Purpose of Horizontal Analysis The purpose of horizontal analysis is to determine how each item changed, why it changed, and whether the change is favourable or unfavourable It’s a way for analysts to compare accounts or performance metrics over time to see if the company is improving or declining
- 5. Vertical Analysis Vertical analysis concentrates on the relationships between various financial items on a financial statement To show this relationship each item on the statement is expressed as a percentage of a base item that also appears on the statement. On the balance sheet, each item is expressed as a percentage of total assets. On the income statement, each item is stated as a percentage of sales
- 6. Purpose of Vertical Analysis To gain insight into the relative importance or magnitude of various items on the financial statements Vertical analysis is applicable for internal performance review as well as for comparison to peers and bench-marking Comparisons allows management and accounting staff at the company to isolate the reasons and take action to fix the problem
- 7. Difference between Vertical and Horizontal analysis Under horizontal analysis an analyst compares the financial statement of the company for two more accounting periods, it can be used on any item in the financial statement company Vertical analysis is done to review and analysis the financial statements for a year only and therefore it is also called static analysis. Under this method each entry for assets, liabilities and equities in a balance sheet is represented as a percentage of the total account
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