Explain horizontal and vertical analysis and how they are prepared to analyze comparative income statements and balance sheets
A horizontal type of analysis is where financial data of a company with the same income is compared with the same financials income the same organization in consecutive years. For example, an individual or auditing company could go through the company's inventory and calculate the difference with the previous years. The amount derived from the past year's financial statements is compared to them, and they restate into the percentage of the financial statement of the base year. Vertical analysis summarises different financial statements. The vertical analysis shows all the financial information the company collected within a particular year in one statement. The data in the report is converted into the percentage of the other data collected. The vertical analysis information makes it easy for the company to compare itself with other companies they are competing against in the market (Price, 2014).
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Explain trend analysis and standard size statements
Trend analysis calculates and evaluates specific organizations' financial information over a given period. The trend analysis period might be calculated depending on the company's choice. The period can be calculated in years, months, and quarterly depending on the company's situation. The main aim of trend analysis is to compute the change in percentage over a given period ( Stuckler, et al., 2012 ). On the contrary, a standard financial statement of the current state is the base financial statement. For example, the income financial statement will give information on the revenues and expense amounts in the form of a percentage of their net sales. Therefore, a standard size sample of the balance sheet will indicate every liability, asset, and owner equity in the form of a percentage of the entire company's assets.
References
Price, J. (2014). College Accounting. McGraw-Hill Higher Education.
Barr, B., Taylor-Robinson, D., Scott-Samuel, A., McKee, M., & Stuckler, D. (2012). Suicides associated with the 2008-10 economic recession in England: time trend analysis. Bmj , 345 , e5142.
