Long description

A figure explaining the meaning and functions of vertical, horizontal and ratio analyses.

In the Ratio Analysis column are three texts with an arrow pointing from one to the next: 1. Ratio analysis puts numbers in perspective with other numbers; 2. Ratio analysis removes the importance of company size in analysing numbers; 3. Ratios provide meaningful relationships between individual financial values in the financial statements.

In the Vertical analysis column are three texts with an arrow pointing from one to the next: 1. Vertical analysis shows relationship of each item in financial statement to one base amount; 2. In income statement each item is shown as a percentage of sales; 3. In statement of financial position each item shown as a percentage of total assets.

In the Horizontal analysis column are two texts with an arrow pointing from one to the next: 1. Horizontal analysis compares two financial statements to calculate percentage changes; 2. Horizontal analysis removes the importance of company size in analysing numbers.