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What is horizontal analysis in financial statement analysis?

Horizontal analysis is used in financial statement analysis to compare historical data, such as ratios, or line items, over a number of accounting periods.

How does a horizontal income statement analysis work?

Horizontal income statement analysis is typically done in a two-year manner, as shown below, with a variance that shows the difference between the two years for each line item. Another option is to simply add as many years as would fit on the screen without presenting a variance, allowing you to monitor overall changes by account over time.

What is a horizontal analysis based on historical data?

Based on historical data, a horizontal analysis interprets the change in financial statements over two or more accounting periods. It denotes the percentage change in the same line item of the next accounting period compared to the value of the baseline accounting period. What is Horizontal Analysis?

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