Horizontal Analysis

Horizontal Analysis

Introduction

Horizontal analysis which is also known to be the trend analysis is basically financial statement's analysis technique which is useful for illustrating the modification in the amounts of the parallel items of the financial statement in a particular time period. It is basically a useful tool for evaluating the situations of the trend. The statements for the span of two periods or even more than two years are been used in the horizontal analysis. The recent period are used as a base year and items which are on the statements for all the later periods are been compared with items which are on the statements of the base period. The changes are generally shown both in dollars and percentage in the horizontal analysis.

Horizontal analysis of financial statement basically comprises of a comparative analysis this is done by using any one of the benchmarks, ratios or a line item over for a certain time period, mostly on annual basis. This particular method of conducted analysis is used for the assessment of the relative changes in different variables. Through this analysis, the behavior of sales, revenues, expenses, incomes and various other kind of items of financial statements. At the time of conducting horizontal analysis the period analyzed can be two or more than two periods. The analysis can be done of the basis of monthly quarterly or may be on the yearly, monthly and quarterly basis. It depends on the decision of the researcher conductor. At the time of the investment appraisal, the accounting periods for analysis base upon the time horizon which is being considered (www.accountingtools).

The horizontal analysis takes into account two kinds of changes which are absolute and relative. The Absolute Change is basically the dollar change between the two periods on the other hand the relative Change is basically a percentage illustration of the absolute change (www.cfs.purdue.edu).

The percentage change which is able to be found is also a very important finding this analysis make the managers equipped with. An effective of understanding developed through this percentage change can tend the manager towards the decision which is the requirement of the scenario (www.wiley.com).

Horizontal Analysis of Emeritus Corp. (NYS: ESC)

This method adopted involving the financial statements' amount of reporting for so many years. The earliest year presented are designated to be the base year and the following years are then been expressed like a percentage of the base year amounts. This ...