Horizontal Analysis

# Horizontal Analysis - HORIZONTAL ANALYSIS

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HORIZONTAL ANALYSIS Horizontal analysis , also known as trend analysis, is a technique for evaluating a series of financial  statement data over a period of time. Its purpose is to determine the increase or decrease that has  taken place, expressed as either an amount or a percentage. For example, here are recent net sales  figures (in millions) of  Kellogg Company 2007 2006 2005 2004 2003 \$11,776 \$10,907 \$10,177 \$9,614 \$8,812 If we assume that 2003 is the base year, we can measure all percentage increases or decreases relative  to this base-period amount with the formula shown in Illustration  13-8 Horizontal analysis—Computation of changes since base  period For example, we can determine that net sales for Kellogg Company increased approximately 9.1%  [(\$9,614 - \$8,812) ÷ \$8,812] from 2003 to 2004. Similarly, we can also determine that net sales  increased by 33.6% [(\$11,776 - \$8,812) ÷ \$8,812] from 2003 to 2007. Alternatively, we can express current-year sales as a percentage of the base period. To do so, we

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## This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.

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Horizontal Analysis - HORIZONTAL ANALYSIS

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