Analysis Of The Horizontal, Vertical And Ratio Methods Essay

1060 Words Jun 30th, 2015 null Page
Analysis 2 The three methods of analysis are used in various ways to make financial decisions about organizations. The horizontal, vertical and ratio methods provide someone on the inside and the outside about the organization trends and ratios concerning matters such as profitability, credit, debt and sales. Each method provide in its own way important matters in which to determine how the company is doing and how well it may do in the future. The horizontal method is used to compare the company’s information side by side for two or more periods. This method can be done in dollars or percentages depending on the information you are trying to get out of the business. It is designed to show any changes in at least two different reporting cycles (monthly, quarterly or annually) to determine certain trends the company may be headed towards. This information is important to internal users as well as external users. You can see how the organization is doing over different periods within a year or yearly. Using this method you can gage how the organization may perform or what was the trend for its highest and lowest performance activity. The drawback would be in comparison in which during that same period in another time something significant may have happened and you had a major accounting charge (tree fell on the building). You can…

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