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Financial Policy Formulation and Business Strategy

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Examine the following in terms of how they are used in financial policy formulation and business strategy:

1. Horizontal analysis
2. Vertical analysis
3. Ratio analysis
-Profitability ratios
-Liquidity ratios
-Asset utilization ratio
-Debt utilization ratio
4. Benchmarking

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1. Horizontal analysis - This type of analysis compares the dollar change and the percent change of each item on a financial statement for two consecutive periods. It is useful in financial policy formulation and business strategy because it identifies the various factors affecting a business, allowing management to adjust their operating strategies accordingly.

2. Vertical analysis - This type of analysis involves the calculation of percentages of a single financial statement listed vertically, which are taken from the company's ...

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