MANAGERIAL ACCOUNTING (LL) W/CONNECT >C<
17th Edition
ISBN: 9781264384150
Author: Garrison
Publisher: MCG CUSTOM
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Question
Chapter 16, Problem 1Q
To determine
Analysis tools are used to analyze and interpret the financial statement data. There are many such techniques to compare the performance of the company like vertical analysis, horizontal analysis, ratio analysis, etc.
To Distinguish: Between horizontal and vertical analysis of financial statement.
Expert Solution & Answer
Explanation of Solution
Solution:
The points of difference between the two analysis methods are as follows:
| Horizontalmethod | Verticalmethod |
| In horizontal method, values of corresponding financial statement items of different periods are compared. | In Vertical method, the financial statement items are shown as a percentage of base items to make decisions. |
| It compares the changes in the corresponding value of items over a period. | It compares the change in the relative proportion of items in financial statements. |
| It is used to compare an organization’s current performance with its past performance. | It compares an organization’s performance with other organizations. |
Conclusion
Thus, there are differences between the horizontal and vertical analysis of financial statement.
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Students have asked these similar questions
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Provide correct answer the financial accounting question
Income statements for Vernon Company for Year 3 and Year 4 follow:
VERNON COMPANY
Income Statements
Year 4
Year 3
Sales
$201,100
$181,100
Cost of goods sold
143,000
121,000
Selling expenses
21,200
19,200
Administrative expenses
12,100
14,100
Interest expense
3,500
5,500
Total expenses
179,800
159,800
Income before taxes
21,300
21,300
Income taxes expense
Net income
6,300
3,300
$ 15,000
$ 18,000
Required
a. Perform a horizontal analysis, showing the percentage change in each Income statement component between Year 3 and Year 4.
b. Perform a vertical analysis, showing each Income statement component as a percentage of sales for each year.
Complete this question by entering your answers in the tabs below.
Required A Required B
Perform a vertical analysis, showing each income statement component as a percentage of sales for each year.
Note: Percentages may not add exactly due to rounding. Round your answers to 1 decimal place. (i.e., 0.234 should be
entered as 23.4).
Sales
VERNON COMPANY…
Chapter 16 Solutions
MANAGERIAL ACCOUNTING (LL) W/CONNECT >C<
Ch. 16 - Prob. 1QCh. 16 - What is the basic purpose for examining trends in...Ch. 16 - Prob. 3QCh. 16 - Prob. 4QCh. 16 - Prob. 5QCh. 16 - Prob. 6QCh. 16 - Prob. 7QCh. 16 - Prob. 8QCh. 16 - A company seeking a line of credit at a bank was...Ch. 16 - Prob. 1F15
Ch. 16 - Prob. 2F15Ch. 16 - Prob. 3F15Ch. 16 - Prob. 4F15Ch. 16 - Prob. 5F15Ch. 16 - Prob. 6F15Ch. 16 - Prob. 7F15Ch. 16 - Prob. 8F15Ch. 16 - Prob. 9F15Ch. 16 - Prob. 10F15Ch. 16 - Prob. 11F15Ch. 16 - Prob. 12F15Ch. 16 - Prob. 13F15Ch. 16 - Prob. 14F15Ch. 16 - Prob. 15F15Ch. 16 - Prob. 1ECh. 16 - Prob. 2ECh. 16 - Prob. 3ECh. 16 - Prob. 4ECh. 16 - Prob. 5ECh. 16 - Prob. 6ECh. 16 - Prob. 7ECh. 16 - Prob. 8ECh. 16 - Prob. 9ECh. 16 - Prob. 10ECh. 16 - Prob. 11ECh. 16 - Prob. 12ECh. 16 - Prob. 13PCh. 16 - Prob. 14PCh. 16 -
PROBLEM 15-15 Comprehensive Ratio Analysis...Ch. 16 - Prob. 16PCh. 16 - Prob. 17PCh. 16 - Prob. 18PCh. 16 - Prob. 19PCh. 16 - Prob. 20PCh. 16 - Prob. 21P
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