Using the following selected items from the comparative balance sheet of Solver Company, illustrate horizontal and vertical analysis.
December 31, 2006 December 31, 2005
Accounts Receivable $ 870,000 $ 600,000
Inventory 950,000 750,000
Total Assets 4,100,000 3,000,000
Horizontal analysis is conducted by setting consecutive balance sheet, income statement or statement of cash flow side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. The most important item revealed by comparative financial statement analysis is trend.
A comparison of statements over several years reveals direction, speed and extent of a trend(s). The horizontal financial statements analysis is done by restating amount of each item or group of ...
An illustration of horizontal and vertical analysis for Solver Company