Income Statement Horizontal Analysis Example

In above analysis 2007 is the base year and 2008 is the comparison year.

Income statement horizontal analysis example. For the year 2018 to illustrate the preparation of horizontal analysis of the financial statement. One of the popular techniques of comparative income statement which shows the change in amount both in absolute and percentage terms over a period of time. Horizontal analysis can also be used to compare growth rates and profitability over a specific period across firms in the same industry. Now it s time to look at a different way to evaluate the income statement.

Horizontal analysis formula example 2. With horizontal analysis we look across the income statement at the year over year yoy year over year yoy stands for year over year and is a type of. These changes may be related to certain changes in income statement items to determine whether they are favorable. Horizontal analysis doesn t conclude with finding the change in sales over a period.

Types of comparative income statement analysis 1 horizontal analysis. To calculate the percentage change first select. Horizontal analysis of an income statement. In horizontal analysis the changes in specific financial statement values are expressed as a percentage and in u s.

Horizontal analysis of the income statement. For example in the two examples below the income statement analysis shows a company having an excellent second year but the related balance sheet analysis shows that it is having trouble funding growth given the decline in cash increase in accounts payable and increase in debt. It helps in easy analysis of trends and as such also known as trend analysis. Here we have the yoy growth rates of colgate s income statement from 2008 until 2015.

A complete horizontal analysis of income statement might tell us that while our. Colgate horizontal analysis example. Trend analysis for income statement items using excel. 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.

For example abc company s total assets increased 17 4 exhibit 15 1 and sales increased 29 7 exhibit 15 2. All items on the balance sheet and income statement for the year 2008 have been compared with the items of balance sheet and income statement for the year 2007. In this case we will be using the income statement and accordingly the following information has been extracted from the annual report. Let us now look at the horizontal analysis of colgate.

Trend analysis for income statement items using excel. Comparative retained earnings statement with horizontal analysis. Likewise we can do the same for all the other entries in the income statement. Let us take the annual report of apple inc.