Spectacular Vertical And Horizontal Analysis Of Financial Statements Examples
On an income statement the base figure is the net sales.
Vertical and horizontal analysis of financial statements examples. Vertical analysis requires numbers in a financial statement to be restated as percentages of a base dollar amount. Horizontal Analysis analyzes the trend of the companys financials over a period of time. In vertical analysis one line on the financial statement shows a base figure of 100 and the other lines represent a percentage of the base figure.
For example when you perform vertical analysis on a balance sheet the base figure is the total assets or liabilities. If the cost of goods sold amount is 780000 it will be presented as 78 780000 divided by sales of 1000000. Comparative income statement with vertical analysis.
Vertical Analysis for an Income Statement. As an example lets take a look at some income statement items for Apple and Google. For example Apples gross profit has declined from 439 in 2012 to 391 while its RD expenses as a percentage of revenue have.
In order to achieve a complete and effective financial analysis both pure financial data and other data that can influence the behavior of securities such as industry and outlook must be considered in the light of the economic environment. Vertical Analysis VA Just as horizontal analysis it is applied to. Horizontal analysis involves the calculation of percentage changes from one or more years over the base year dollar amount.
Vertical Analysis compares the relationship between a single item on the Financial Statements to. An example of the vertical analysis of balance sheet and income statement is given below. It is a useful tool to evaluate the trend situations.
For example the amount of cash reported on the balance sheet at December 31 of 2006 2005 2004 2003 and 2002 will be expressed as a percentage of the December 31 2002 amount. A Vertical Analysis is performed for a specific period such as a month quarter year etc. Example of Vertical Analysis of an Income Statement.