Session 1: Vertical and Horizontal Analysis Technique
Session Learning Outcomes
Learners will understand and be appreciative on the use of the horizontaland vertical analysis technique while analyzing the financial statementsinformation, its application and interpretation.
Important Learning Terms
Horizontal financial statements analysis
Vertical financial statements analysis
Cross sectional financial statement analysis
: is a process which involves reclassification andsummarization of information through the establishment of ratios andtrends.
Analysis of financial statement:
Refers to the examination of the statementsfor the purpose of acquiring additional information regarding the activities of the business.The users of the financial information often find analysis desirable for theinterpretation of the firm’s activities.
Note: The financial statement to be used for the purpose of analysis should be the audited ones. The audited financial statements give the analyst theauditor’s statement as to whether the records represent a fair view of thecompany’s affairs.The Objectives of Financial Statement Analysis
The overall objective of financial statement analysis is the examination of afirm’s financial position and returns in relation to risk. This must be donewith a view to forecasting the firm’s future prospective.For the purpose of understanding, the following financial statements will beused.
Financial Statement Analysis