horizontal and vertical analysis

financial statement analysis

• evaluating internal financial health of a business

• used by creditors, investors, internal decision managers

comparative statement

a document used to compare a particular financial statement with prior period statements

horizontal analysis

• aka trend analysis

• used for balance sheet, income statement and statement of retained eearnings

• examines behavior over periods of time by showing percentage change

trend percentage

change of financial info over a number of years

vertical analysis

• aka common size analysis

• uses percentages; compares each item with a key financial statement figure

• evaluates relationship with various financial statement items for a specific period of time

ratio analysis

• compares line item data from financial statement

• reveals profitability, liquidity, operational efficiency, solvency

• DO NOT COMPARE; different in each industry due to holding periods