Question

What type of analysis is being performed if the following formula is used: [(Current Year -...

What type of analysis is being performed if the following formula is used:

[(Current Year - Previous Year)/Previous Year] * 100

Horizontal Analysis

Net Present Value Analysis

Break-even analysis

Vertical Analysis
Business   Accounting   
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Answer #1

Solution :

The Answer is (a) Horizontal Analysis.

Horizontal Analysis is used to compare the companies current year financial performance from last years. Eg. If the sales is increased by 10% in current year as compare to last year, it means the person is using the horizontal analysis method. One more example, if we are comparing net profit of 2015 with net profit of 2014 this is the horizontal analysis.

The formulas used is [(Current Year - Previous Year)/Previous Year] * 100.

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