Ebook Description :

The vertical analysis of an income statement results in every income statement amount being restated as a percent of net sales example of vertical analysis of a balance sheet if a companys inventory is 100000 and its total assets are 400000 the inventory will be expressed as 25 100000 divided by 400000. Understanding horizontal and vertical analysis is essential for managerial accounting because these types of analyses are useful to internal users of the financial statements such as company management as well as to external users. In horizontal financial analysis the comparison is made between an item of financial statement with that of the base years corresponding item on the other hand in vertical financial analysis an item of the financial statement is compared with the common item of the same accounting period. The key difference between horizontal and vertical analysis is that horizontal analysis is a procedure in financial analysis in which the amounts in financial statements over a certain period of time is compared line by line in order to make related decisions whereas vertical analysis is the method of analysis of financial statements where each line item is listed as a percentage of another item