Horizontal Analysis On Income Statement

We calculate the growth rate of each of the line items with respect to the previous year.

Horizontal analysis on income statement. Horizontal analysis of an income statement. Vertical analysis and horizontal analysis. 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. In above analysis 2007 is the base year and 2008 is the comparison year.

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. There are two methods commonly used to read and analyze an organization s financial documents. Colgate horizontal analysis example. An evaluation of one process or activity across several groups or departments within an enterprise.

Comparative retained earnings statement with horizontal analysis. Let us now look at the horizontal analysis of colgate. 2017 2018 2019 revenue 54 000. Horizontal analysis income statement.

Trend analysis for income statement items using excel. 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. Horizontal analysis doesn t conclude with finding the change in sales over a period. 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.

Likewise we can do the same for all the other entries in the income statement. The difference between the two is in the way a statement is read and the comparisons you can make from each type of analysis. Trend analysis for income statement items using excel.