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Competition Bike Inc Task 1

In: Business and Management

Submitted By laurascheel
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Competition Bikes, Inc. Summary Report

A1a. What is horizontal analysis? The comparison of two or more year’s financial data is known as horizontal analysis, or trend analysis. Horizontal analysis displays changes between years in both dollar and percentage. Showing change in dollar form helps the company pay close attention to key factors which have impacted the growth and profitability of the business. Showing changes between years in percentage form helps the company gain valuable insight. Horizontal analysis can be used for comparing and assessing the company’s growth during a particular time. In order to assess a company’s performance relative to its competitors, horizontal analysis is performed on multiple companies in the same industry. Horizontal analysis can be performed on a monthly, quarterly or annual basis. Horizontal analysis provides valuable information for the company; comparing the results of business activities over time to determine whether its financial situation is improving is an important part of the business operations. While horizontal analysis is a very important aspect to determine the company's financial performance, it also encounters some difficulties. According to the website Accounting Tools "A common problem with horizontal analysis is that the aggregation of information in the financial statements may have changed over time, due to ongoing changes in the chart of accounts[->0], so that revenues, expenses, assets, or liabilities may shift between different accounts and therefore appear to cause variances when comparing account balances from one period to the next” (Tools).
Conducting a horizontal analysis is more effective if you review all of the financial statements at the same time, so that you can see the complete impact of operational results on a company's financial condition over the review period. Horizontal analysis of...

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