Horizontal Analysis Income Statement Definition

We calculate the growth rate of each of the line items with respect to the previous year.

Horizontal analysis income statement definition. To get a clear picture of the performance of our business we need to do a horizontal analysis of each item in our income statement. Horizontal analysis can be used with an income statement or a. However the most common way horizontal analysis is used is to compare items on income statements balance. Let us now look at the horizontal analysis of colgate.

Horizontal analysis of an income statement. Colgate horizontal analysis example. A horizontal audit is appropriate for processes and activities that are. An evaluation of one process or activity across several groups or departments within an enterprise.

Horizontal analysis doesn t conclude with finding the change in sales over a period. The statements for two or more periods are used in horizontal analysis. Here we have the yoy growth rates of colgate s income statement from 2008 until 2015. Horizontal analysis can be completed on any line item or part of a financial statement.

Horizontal analysis sometimes called trend analysis is the process of comparing line items in comparative financial statements or financial ratios across a number of years in an effort to track the history and progress of a company s performance. Horizontal analysis also known as trend analysis is a financial statement analysis technique that shows changes in the amounts of corresponding financial statement items over a period of time it is a useful tool to evaluate the trend situations. Likewise we can do the same for all the other entries in the income statement.