Example of Horizontal Financial Statement Analysis for Effective Asset Evaluation

Financial statement analysis is a crucial tool for evaluating the financial health and performance of a company. Among the various methods of financial analysis, horizontal financial statement analysis is widely used to analyze trends and changes in a company's financial statements over a specific period. In this article, we will provide an example of how to perform horizontal financial statement analysis, focusing on key elements such as assets, liabilities, and equity.

Understanding Horizontal Financial Statement Analysis

Horizontal financial statement analysis involves comparing financial data from multiple periods, typically presented in a company's income statement, balance sheet, and cash flow statement. The purpose is to identify trends, patterns, and changes in financial performance over time.

An Example of Horizontal Financial Statement Analysis

Let's consider a hypothetical example of a company, XYZ Inc., and analyze its financial statements for the past three years. We will specifically focus on the key elements of assets, liabilities, and equity:

• Assets: In our analysis, we notice that XYZ Inc.'s total assets have increased steadily over the past three years. In 2018, the total assets were $1 million, which grew to $1.5 million in 2019, and further to $2 million in 2020. This indicates a positive trend in the company's asset base.
• Liabilities: From the liability perspective, we observe that XYZ Inc.'s total liabilities have also experienced a consistent increase. In 2018, the total liabilities were $500,000, which rose to $750,000 in 2019, and further to $1 million in 2020. This suggests that the company's debt obligations have also increased over time.
• Equity: By subtracting total liabilities from total assets, we can calculate XYZ Inc.'s equity. In 2018, the equity was $500,000 ($1 million assets - $500,000 liabilities), which increased to $750,000 in 2019, and further to $1 million in 2020. This indicates that the company's net worth has grown steadily.

Download the Horizontal Financial Statement Analysis Example

If you wish to dive deeper into horizontal financial statement analysis and explore the financial performance of companies in more detail, we provide a comprehensive example in PDF format. This analysis example will guide you through the process step-by-step, helping you understand the intricacies of financial statement analysis.

Visit BizzLibrary.com today to download the horizontal financial statement analysis example in PDF format. Start gaining valuable insights into the financial health of companies and make informed business decisions. Take your financial analysis skills to the next level with our comprehensive resources!