ACC 280 WEEK 4 DQ 1 - Comparing two years financial...

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Week 4 What are the differences between vertical and horizontal analysis? Which method would external users most likely use? How about internal users? Discuss the uses of the two analysis methods and how you would use each to analyze a company’s performance?
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The main difference between vertical analysis and horizontal analysis is that while horizontal analysis compares the figures under different heads in the income statement and the balance sheet, vertical analysis represents each figure as a percentage of the total along with the change in both over the past year. So, in vertical analysis, the figures are not only compared to the past year, but they are also represented as a percentage of the total cost or total assets/liabilities as may be the case.
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Unformatted text preview: Comparing two years financial statements or comparing one company's financial statements with other company is called horizontal analysis. If you are comparing sales of two years you will find the difference in sales between two years in % as well as in $. Vertical analysis bifurcate all components of a statement and relate it to one total figure. For income statement all figures are related to sales like what is the percentage of cost of goods sold to sales, etc. Horizontal analysis is more helpful in analyzing the changes between two years. I have analyzed the changes in my personal expenditure as compared to previous year to find out the reason of increase....
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This note was uploaded on 11/21/2011 for the course ACC 280 280 taught by Professor Lindaking during the Spring '10 term at University of Phoenix.

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ACC 280 WEEK 4 DQ 1 - Comparing two years financial...

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