MGT 311 week 4 DQ 1in Business (Education) by nerdythetutor
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What are the differences between vertical and horizontal analysis? Which method would external users most likely use? How about internal users? Discuss the uses of the two analysis methods and how you would use each to analyze a company's performance?
Horizontal analysis "refers to examination of financial statement data across time". For instance, revenues and expenses may be compared over a period of several years. Comparisons may be performed in one of the two following ways: percentage and absolute dollars. In the first case, a change in operating expenses from 1,000 in period one to 1,050 in period two would be reported as a 5% increase. This method is particularly useful when comparing small companies to large companies. The second method compares the absolute dollar...