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Horizontal and Vertical Analysis

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Describe the concepts of horizontal and vertical analysis; what each is useful for and give a brief example of each.

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Solution Summary

The solution describes horizontal and vertical analysis and explains the usefulness of each type.

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Horizontal analysis is a form of business comparison where an investor might measure, for example, the growth in revenues over a time line, say, one fiscal year. For example, if 2007 is used as the baseline and revenues were $1,000,000 and year 2008 with revenues of $1,100,000 is compared, one would say that 2008 sales increased by 10% over the base year.

Vertical analysis is a ...

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