Horizontal Trend Analysis Income Statement

Net income at pepsico increased 374 000 000 or 6 3 percent while net income at coca cola increased 4 985 000 000 or 73 1 percent as shown in figure 13 1 income statement trend analysis for.

Horizontal trend analysis income statement. Trend analysis for income statement items using excel. With horizontal analysis we look across the income statement at the year over year yoy change in each line item. Horizontal analysis formula amount in comparison year amount in the base year amount in a base year x 100 horizontal analysis example basic let us assume that we are provided with the income statement data of company abc. Figure 13 1 income statement trend analysis for shows that net sales increased by 4 129 000 000 or 13 3 percent.

The statements for two or more periods are used in horizontal analysis. The increase in net sales. Horizontal analysis is used in the review of a company s financial statements over multiple periods. It is usually depicted as a percentage growth over the same line item in the base year.

For useful trend analysis you need to use more years most investors use five but this example gives you all the info you need to prepare a horizontal analysis for an unlimited number of years. The analysis computes the percentage change in each income statement account at the far right. A horizontal analysis also referred to as trend analysis is a procedure in the financial analysis where the amounts of financial information over a certain period of time is compared line by line in order to make related decisions. In order to perform this exercise you need to take the value in period n and divide it by the value in period n 1 and then subtract 1 from that number to get the percent change.

We need to horizontal analysis on this company. Thus coca cola s growth in net income far exceeded that of pepsico. Horizontal or trend analysis is used to spot and evaluate trends over a specific period of time. For instance instead of creating a balance sheet or income statement for one specific period of.