Horizontal Analysis Of Income Statement Interpretation

In the relative financial statement of the companies.

Horizontal analysis of income statement interpretation. A complete horizontal analysis of income statement might tell us that while our. Interpretation of horizontal analysis. In other words it indicates the change either in absolute terms or as percentage change year over year y o y in each of the line items. Trend analysis for income statement items using excel.

So we only need one period of data to derived the percentages and completed the analysis. In above analysis 2007 is the base year and 2008 is the comparison year. Likewise we can do the same for all the other entries in the income statement. To get a clear picture of the performance of our business we need to do a horizontal analysis of each item in our income statement.

Understanding horizontal and vertical analysis is essential for managerial accounting because these types of analyses are useful to internal users of the financial statements such as company management as well as to external users. Unlike horizontal analysis a vertical analysis is confined within one year or one vertical column of the balance sheet. All items on the balance sheet and income statement for the year 2008 have been compared with the items of balance sheet and income statement for the year 2007. The term horizontal analysis refers to the financial statement analysis in historical data from the income statement balance sheet and cash flow statement is compared with each other.

Horizontal analysis can be interpreted as internal comparison and external. Comparative retained earnings statement with horizontal analysis. A vertical analysis can be completed on both an income statement and a balance sheet. Trend analysis for income statement items using excel.

In the horizontal analysis the financial data of the companies is compared to the base of the comparative financial statement. Horizontal analysis is the method of function statement analysis which represents the percentage income and percentage decrease. Let us now look at the horizontal analysis of colgate. Horizontal analysis of an income statement.

Horizontal analysis provides a trend from past to current performance of the company by taking into consideration the respective changes in that years. Horizontal analysis doesn t conclude with finding the change in sales over a period. Here we have the yoy growth rates of colgate s income statement from 2008 until 2015. Statement of comprehensive income for the year ended 31 december 20xx.