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What is the formula for Horizontal analysis?

For example, take the income statement of a company and we can select a line item, e.g. net income. The formula for horizontal analysis will be: Historical analysis (%) = net income in year 2 – net income in the base year (year 1) / net income in a base year * 100

What is horizontal analysis?

Horizontal Analysis → The comparison of a company’s financial data between periods to spot trends (or developments), as well as for peer group benchmarking purposes. Thus, companies of different sizes in terms of total revenue and currently at different stages in their lifecycle can still be compared to obtain useful insights.

What is a horizontal analysis of income statements?

Horizontal analysis of income statements also produces worthwhile information. For example, in Safeway Stores' balance sheets, both sales and the cost of sales increased from 2018 to 2019. However, the percentage increase in sales was greater than the percentage increase in the cost of sales.

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