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Horizontal Analysis vs. Vertical Analysis

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Your friend comments, "Horizontal analysis is better than vertical analysis because you can actually see if things are improving between the years." Do you agree with this statement? Explain why or why not.

If you were an investor who was considering a potential company in which to buy stock, what three ratios would be your top choices to review? Provide an explanation for your response.

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The horizontal analysis versus vertical analysis are provided.

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Discussion Questions Short Answer
Your friend comments, "Horizontal analysis is better than vertical analysis because you can actually see if things are improving between the years." Do you agree with this statement? Explain why or why not.

Horizontal analysis, known as a trend analysis, is mainly used to check which items are changing the most, which is called an absolute comparison. This can be used on item in all the financial statements. Horizontal analysis can also perform a percentage comparison, which is useful when comparing two companies of different sizes.
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