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Financial Statement Analysis Based on Method of Operation

Financial Statement Analysis Based on Method of Operation:

Based on the methods of operation, financial statement analysis may be classified
into two major types such as horizontal analysis and vertical analysis.

A. Horizontal Analysis:

Under the horizontal analysis, financial statements are compared with several years and based on that, a firm may take decisions. Normally, the current year’s figures are compared with the base year (base year is consider as 100) and how the financial information are changed from one year to another. This analysis is also called as dynamic analysis.

Financial Statement Analysis Based on Method of Operation
[Post Image Courtesy of DigitalArt at FreeDigitalPhotos.net]

B. Vertical Analysis:

Under the vertical analysis, financial statements measure the quantities relationship of the various items in the financial statement on a particular period. It is also called as static analysis, because, this analysis helps to determine the relationship with various items appeared in the financial statement. For example, a sale is assumed as 100 and other items are converted into sales figures.

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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