Question

Distinguish horizontal analysis from vertical analysis of financial statement.

Answer 1

Particulars	Horizontal analysis	Vertical analysis
Also Known as	Trend Analysis	Percentage - wise Analysis
Comparision	Amount of financial information over a certain period of time is compared line by line for making related decisons	Analysis of financial statements where each line item is listed as a percentage of another item for making useful decisions
Assists	Assits in understanding how the results have changed from one period to another	Assits to compare changes in percentage terms
Expressed/calculated	This can be calculated in absolute terms as well as in percentage terms	Each item on the income statement is expressed as a percentage of sales revenue and balance items as percentage of total assets
Usefulness	Useful in comparing company results with previous financial years	Useful in comparing company results with other companies