Question

What is horizontal analysis

Answer 1

Horizontal analysis is a financial analysis method used in business to compare financial data over a certain period, usually several years. It involves the comparison of financial statements to identify trends, changes, and patterns in performance indicators such as revenue, expenses, and net income.

Step-by-step explanation:

Horizontal analysis is a financial analysis method used in business to compare financial data over a certain period, usually several years. It involves the comparison of financial statements to identify trends, changes, and patterns in performance indicators such as revenue, expenses, and net income. This analysis allows businesses to evaluate their growth, identify potential risks, and make informed decisions.

For example, let's say you want to analyze the revenue of a company over the past five years. You would gather the financial statements of the company for each year and compare the revenue figures side by side. By doing this, you can determine if the company's revenue has increased, decreased, or remained stable over time.

Answer 2

Horizontal analysis is used in the review of a company's financial statements over multiple periods

Step-by-step explanation:

It is usually depicted as percentage growth over the same line item in the base year. Horizontal analysis allows financial statement users to easily spot trends and growth patterns.