Question

Discuss when horizontal analysis would be most beneficial. Discuss when vertical analysis would be most beneficial. Discuss when ratio analysis would be most beneficial.

Answer 1

Horizontal analysis would be beneficial when comparing company growth rates in relation to competitors and industry. It can be beneficial on any item in company's financials from revenues to EPS and comparing the performance of the companies.

Vertical analysis would be beneficial when comparing balance sheets, income statements and other financial reports of businesses of all sizes. It makes easy to find relative annual charges with one business.

Ratio analysis would be beneficial to compare various aspects of a company's operating and financial performance like efficiency, liquidity, profitability and solvency.