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Horizontal Analysis of Financial Statements financial analysis of a company

by Dragonspear



In this video on Horizontal Analysis of Financial Statements, here we provide you with its definition and formula along with interpretation of Horizontal Analysis.

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐇𝐨𝐫𝐢𝐳𝐨𝐧𝐭𝐚𝐥 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐨𝐟 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐒𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭𝐬?
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One of the most important techniques for finding out how a firm is doing financially is Horizontal Analysis of Financial Statements. It is used for year – over – year (YoY) or quarter – over – quarter (QoQ) trends assessment.

𝐇𝐨𝐫𝐢𝐳𝐨𝐧𝐭𝐚𝐥 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Horizontal Analysis Formula = [(Amount in comparison year – Amount in base year)/ Amount in base year] x 100.

𝐈𝐧𝐭𝐞𝐫𝐩𝐫𝐞𝐭𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐇𝐨𝐫𝐢𝐳𝐨𝐧𝐭𝐚𝐥 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬
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#1 – A firm can represent fairly good hold on its financial affairs from the income statement and balance sheet. But it is your responsibility as an investor to verify each item and see why there is a difference.

#2 – By modifying a few things here and there, firms can inflate profit or show undervalued statement. But if you pay attention to details, you’d be able to find out what’s going on in the firm.

#3 – In comparison to other ratios, this method gives investors an general picture of where a firm stands in financial matters, what they are trying to do with the funds and how profitable the firm can be in the near future.

To know more about 𝐇𝐨𝐫𝐢𝐳𝐨𝐧𝐭𝐚𝐥 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐨𝐟 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐒𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭𝐬, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:-

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Horizontal Analysis of Financial Statements

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Horizontal Analysis of Financial Statements
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