Module 7 : Interpretation and Analysis of Accounts
Lecture 1 : Vertical & Horizontal Analysis
 

Horizontal Analysis
Horizontal analysis involves comparison of two years for the same concerns. It involves preparation of Comparative Statement.
  • Every item on the financial statement is compared with that in the previous year.  
  • The change is calculated in absolute amount and also as a percentage of that base.

Vertical Analysis

Vertical analysis on the other hand involves finding out the relationship between two items in respect of the same concern and in same year. It involves preparation of Common-size Statement.

  • Compares each item in a financial statement to a base number set to 100%.
  • Every item on the financial statement is then reported as a percentage of that base.