Income Statement Horizontal Analysis
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Horizontal analysis of an income statement.
Income statement horizontal analysis. 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. By using horizontal analysis we can now clearly see that google s revenue gross profit and ebitda grew faster than apple s in every year except for 2015 and one ebita exception in 2018 with 2016 looking particularly rough for apple. In other words it indicates the change either in absolute terms or as percentage change year over year y o y in each of the line items. We need to horizontal analysis on this company.
For example you start an advertising campaign and expect a 25 increase in sales. The term horizontal analysis refers to the financial statement analysis in historical data from the income statement balance sheet and cash flow statement is compared with each other. A complete horizontal analysis of income statement might tell us that while our sales figure increased by 66 67 our profits declined by 10 over the previous year. Horizontal analysis doesn t conclude with finding the change in sales over a period.
We can perform horizontal analysis on the income statement by simply taking the percentage change for each line item year over year.