Concept Introduction:
Financial Statement analysis is done using the components of financial statement. These components are Balance sheet, Income statement, Statement of Cash flows etc. Annual report of a company contains financial statement of that year and previous year for comparison. If the company has subsidiaries or segments, the financial statement shall be consolidated for whole business of the company.
Vertical Analysis:
Vertical Analysis is used to analyses the % of items in statement for a particular period as the % of total amount. Vertical Analysis is done for particular period for different items. For example analysis of % of assets as % of Total assets for a particular year is done using the Vertical analysis.
Horizontal Analysis:
Horizontal Analysis is used to analyses the trend of a particular item. Horizontal Analysis is done for particular items for different periods for example analysis of trend of sales for several years is done using the horizontal analysis.
Requirement-a:
To Indicate:
Limitation of ratio analysis while examining companies using different accounting system
Concept Introduction:
Financial Statement analysis is done using the components of financial statement. These components are Balance sheet, Income statement, Statement of Cash flows etc. Annual report of a company contains financial statement of that year and previous year for comparison. If the company has subsidiaries or segments, the financial statement shall be consolidated for whole business of the company.
Vertical Analysis:
Vertical Analysis is used to analyses the % of items in statement for a particular period as the % of total amount. Vertical Analysis is done for particular period for different items. For example analysis of % of assets as % of Total assets for a particular year is done using the Vertical analysis.
Horizontal Analysis:
Horizontal Analysis is used to analyses the trend of a particular item. Horizontal Analysis is done for particular items for different periods for example analysis of trend of sales for several years is done using the horizontal analysis.
Requirement-a:
To Indicate:
Advantages of vertical and horizontal analysis while examining companies using different accounting system
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