To perform a horizontal analysis, you need to compare the current year's financial data to the prior year's data and calculate both the dollar amount and the percentage change for each item.
Here's how to do it for cash and accounts receivable:
1. Calculate the dollar amount change:
Dollar Amount Change = Current Year Amount - Prior Year Amount
For cash:
Dollar Amount Change (Cash) = $70,000 - $50,000 = $20,000 (increase)
For accounts receivable (net):
Dollar Amount Change (Accounts Receivable) = $70,400 - $80,000 = -$9,600 (decrease)
2. Calculate the percentage change:
Percentage Change = (Dollar Amount Change / Prior Year Amount) * 100%
For cash:
Percentage Change (Cash) = ($20,000 / $50,000) * 100% = 40% increase
For accounts receivable (net):
Percentage Change (Accounts Receivable) = (-$9,600 / $80,000) * 100% = -12% decrease
So, the horizontal analysis would show the following changes:
- Cash increased by $20,000, which is a 40% increase.
- Accounts receivable (net) decreased by $9,600, which is a 12% decrease.