ratios - Horizontal analysis of financial statements...

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of financial statements compares values in a certain period to values in prior periods and computes the dollar and percentage change horizontally on each line. For example, on the income statement, net sales or cost of goods sold for the current period may be compared to those in the previous period or periods in various ways. Below are two examples of horizontal analysis. Find the change in the dollar amount and the percentage change calculated with the earlier year's value (2007) as the base year. The base year is the year used for comparison purposes and is given a value of 100%. If the change is a decrease, it is placed in parentheses. Horizontal analysis compares the values from a number of periods and computes the value of each year as a percentage of the base year. This is often called trend analysis . In this example, 2006 is the base year. Horizontal analysis can be used with any financial statement. Business decision-makers use horizontal analysis to assess the soundness and performance of a company based on detected trends of increase and decrease. These trends are also used to project future performance and financial position. 1.
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This note was uploaded on 06/26/2010 for the course GB 201 taught by Professor Levesque during the Spring '08 term at Bentley.

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ratios - Horizontal analysis of financial statements...

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