Final answer:
Horizontal analysis is used to compare financial statement items over different periods, aiding in trends analysis, whereas vertical analysis shows items as percentages of a base figure. Cost analysis in graph form can make some cost types look almost flat due to scale differences. Appropriate graphs, like line graphs and bar charts, help in data comparison.
Step-by-step explanation:
Horizontal analysis compares the same financial statement items over two or more accounting periods. This type of analysis allows for the observation of trends or changes in the entity's financial performance over time. In contrast, vertical analysis is used to show each item on a single financial statement as a percentage of a base figure, helping to understand the relative proportion of account balances.
Considering the aspects of cost in business, the total cost of producing goods or services, such as 40 haircuts at a value of $320, can be examined over time using horizontal analysis. However, when looking at costs like marginal cost, average cost, and average variable cost on a graph, they may appear almost flat on the horizontal axis compared to total cost, fixed cost, and variable cost due to their relative magnitude.
It's important to use appropriate graphical representations, such as line graphs and bar charts, to effectively demonstrate and compare financial data. Line graphs show the relationship between two variables, while bar charts are often used for comparing different data points.