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Xacc W 7 Checkpoint

In: Business and Management

Submitted By missy31314
Words 368
Pages 2
Ratio Vertical and Horizontal Analyses

There are three tool in a financial statement, Ratio, Vertical, and Horizontal. Horizontal the first financial tool evaluates the performance of the company from period to period. Horizontal analysis can also be called trend analysis and is used to look over data over a period of time to determine if there were increases or decreases that has taken place. Horizontal analysis is used primarily in intercompany comparisons. Vertical analysis is the second tool used in a financial statement. Vertical analysis can also be called common-size analysis. This tool is used to express each financial statement item as a percent of a base amount. Vertical analysis shows the relative size of each category in the balance sheet. Ratio analysis expresses the relationship among selected items of a financial statement data. Both external and internal will use this tool in determining the growth of the company.

Pepsi Co

2005 Ratio 2004 Ratio

Current Assets $10,454 Current Assets $8,639

Current Liabilities $9,406 Current Liabilities $6,752

Divide 10,454 by 9,406 = 1.11% Divide 8,639 by 6,752 = 1.28%

2005 Vertical 2004 Vertical

Current Assets $10,454 Current Assets $ 8,639

Total Assets $31,727 Total Assets $27,987

Divide 10,454 by 31,727 = 32.9% Divide 8,639 by 27,987 = 30.9%

Horizontal

Current 2005 Assets $10,454 Current

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Week 7 Checkpoint: Ratio, Vertical, and Horizontal Analyses

...Week 7 Checkpoint: Ratio, Vertical, and Horizontal Analyses XXXXXXXXXX XACC/280 June 28, 2014 Zenos Gavales A financial statement analysis is the process of review financial statements that can include balance sheets and profit or loss statements. The three tools of financial statement analysis are ratio analysis, horizontal analysis and vertical analysis. With ratio analysis we can analyze data and determine the overall financial strength of a company. Horizontal analysis is a procedure in which an analyst compares ratios or line items in business financial statements over a period of time. Vertical analysis most common use is with financial statements for a single time period. Vertical analysis compares between two or more companies in the same industry. PepsiCo, Inc. The current ratio for any company is calculated with the use of the following mathematical equation. Current Ratio = Current Assets Current Liabilities 2005 2004 $10454 =1.11:1 $8639 =1.28:1 $ 9406 $6752 Vertical Analysis = Item on BIS = Percentage Total Assets Or Item on BIS Total Liabilities w/shareholders equity =Percentage Two measures of vertical analysis: Current Assets = 10454 = 33% Total Assets 31727 Short – term Obligations = 2889 = 9% Total Liabilities w/shareholders equity...

Words: 393 - Pages: 2