Question

What benefits do you see to performing horizontal and vertical analyses of financial statements? What do...

What benefits do you see to performing horizontal and vertical analyses of financial statements? What do we learn beyond the information already provided in clearly presented financial statements?

Homework Answers

Answer #1
  • Horizontal and Vertical analysis are two common tools used for assesing organizational performance.
  • Vertical analysis looks at each and every lineitem as a percentage of base figure with current period
  • Horizontal analysis looks at the changes in dollar amounts in a company perforomance

Benifits of Vertical analysis:

  • Simple to learn and implement
  • Helps in identifying where the company has invested resources
  • Helps in comparing numbers of company between different periods

Benifits of Horizontal analysis

  • It helps understand revenue expenses and other lineitems
  • It helps to spot trends growth patterns
  • It is depicted as percentage growth over the same line item in base year
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