Horizontal Analysis

What is Horizontal Analysis?

Horizontal Analysis is a financial analysis technique that involves evaluating financial statements over multiple periods to determine the trend line for specific line items. This method is essential for identifying patterns and trends in a company's financial performance over time.

Short Description: A technique in financial analysis used to evaluate changes in financial statement items over a period of time.

• Trend Analysis: Helps in examining how items such as revenue or costs have changed over several periods.
• Comparative Data: Facilitates comparison of financial data year-over-year, enabling the evaluation of financial improvement or deterioration.
• Investment Decisions: Useful for investors and analysts to make informed decisions based on company performance trends.

In practice, horizontal analysis involves calculating the percentage change in each item and can help isolate factors contributing to operational success or identify areas needing improvement.