Horizontal and Vertical Analysis
Horizontal analysis involves taking the financial statements for a number of years, lining them up in columns, and comparing the changes from year to year. Figure 21-1 shows an example of horizontal analysis.
Vertical analysis involves taking the information on the financial statements and comparing all the numbers to a single number on the statement. For instance, on the Income Statement, all the accounts are expressed as a percentage of sales (or revenue). Figure 21-2 shows an example of vertical analysis.
| 2000 | 2001 | Change | 2002 | Change | |
|---|---|---|---|---|---|
| Revenue | 1,000,000 | 1,200,000 | 20.0% | 1,500,000 | 25.0% |
| Salaries | 600,000 | 700,000 | 16.7% | 800,000 | 14.3% |
| Rent | 110,000 | 120,000 | 9.1% | 140,000 | 16.7% |
| Supplies | 65,000 | 70,000 | 7.7% | 72,000 | 2.9% |
| Telephone | 50,000 | 55,000 | 10.0% | 65,000 ... |
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