Accounting › Section O · Cash flows and statement analysis › Topic O.5
Horizontal and vertical analysis
A set of financial statements is a wall of numbers until you compare them with something. Horizontal analysis compares each line with earlier years; vertical analysis compares each line with a total in the same year. Together they are the first tools an analyst reaches for.
In this topic
- Why analyse financial statements
- Three tools
- Horizontal analysis
- Comparing rates of change
- Trend percentages
- Vertical analysis
- Common-size comparisons and benchmarks
- Worked example: Larkspur Outfitters' income statement
- Worked example: trends and a common-size balance sheet
- Common mistakes to avoid
- Key takeaways
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