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Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. What are the differences between these two methods?
Under horizontal analysis an analyst compares the financial statement of the company for two more accounting periods, [ it can be used on any item in the financial statement company so if company wants to see whether its sales for current year is good or not it will compare the sales for the year 2010 with sales for year 2009 or for previous years. It is a time series analysis in the sense that
it shows comparison of financial data for several years against a chosen base year. It is also called dynamic analysis of the financial statements. Vertical analysis is done to review and analysis the financial statements for a year only and therefore it is also called static analysis. Under this method each entry for assets, liabilities and equities in a balance sheet is represented as a percentage of the total account. So if in asset side of balance sheet cash is $200, building is $400 and machinery is $600 and total of balance sheet is $1000, then cash will be 20 percent of total of balance sheet building will be 40 percent and machinery will be 60 percent. ]
Expert answered|selymi|Points 11139|
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Asked 8/20/2013 10:16:58 AM
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What are some common ratios used to analyze financial information?
Weegy: There are different types of financial ratios used to analyze financial performance: profitability ratios, liquidity ratios, activity ratios, [ leverage ratios and market ratios. Check out the links for additional details: ] User: What are some common ratios used to analyze financial information? Which are the most important? Weegy: No one ratio is more important than another. Individual ratios should not be interpreted in isolation. [ Ratios used for performance evaluation should always be compared to some benchmark, such as comparatively to gauge past preformance; but most importantly to either an *industry average* or perhaps the identical ratio for the industry leader. ] (More)
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Asked 8/20/2013 8:49:47 AM
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What are some examples of how ratios are used in the decision-making process?
Weegy: Ratios used in management accounting illustrate the relationship between financial statements. The usefulness of a ratio depends on what aspects of the company’s business affairs are being investigated. [ Financial ratios should be used correctly for it to be effective; when it comes to comparing the company’s financial ratio it must be compared with identical basis. ] (More)
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