A company’s comparative statements are given below. Please conduct the following analyses: a. Horizontal analysis (trend analysis) on the income statement b. Vertical analysis (common size financial statement analysis) on the income statement
A company’s comparative statements are given below. Please conduct the following analyses: a. Horizontal analysis (trend analysis) on the income statement b. Vertical analysis (common size financial statement analysis) on the income statement
Chapter20: Corporations And Partnerships
Section: Chapter Questions
Problem 25CE
Related questions
Question
A company’s comparative statements are given below. Please conduct the following analyses: |
a. Horizontal analysis (trend analysis) on the income statement |
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b. Vertical analysis (common size financial statement analysis) on the income statement | |||||||||
Note: | |||||||||
When the dollar change is positive, it indicates that the value increased and therefore the % change should be positive. Therefore, when calculating % change involving a negative baseline value, use the absolute value of the baseline number in the denominator: % change = (new value - original baseline value)/|baseline value|. Otherwise the % change will be inconsistent with the real change. For example: Let's say item A changed from -10 to +10. Item A increased by 20 and thus should give rise to a positive % change. However, % change based on formula using the original value of -10 is -200% = [10-(-10)]/(-10). Let’s look at another example. Assume item B changed from -10 to -20, a decrease of 10 with a % change of -100%. However, % change based on formula using the original value of -10 is 100% = [-10-(-20)]/(-10). |
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