Hello Professor and classmates,

Today I will be discussing horizontal and vertical analyses. Each analysis is important for businesses to understand because they track financial data and make predictions and comparisons, most of the time annually. These different types or report provide insights into problems and opportunities and can help develop financial strategies so businesses can prepare.

Horizontal analysis, trend analysis, look at financial trends over periods of time. Horizontal reports are usually the most helpful, if the company has been operating for a lengthy amount of time. These reports show figures from a certain time and allows the reviewer to get an overview of the different changes over time.

Vertical analyses are similar to horizontal analysis but differ when looking at the same financial documents. Instead of looking at trends over changing time periods, you translate every figure into percentages. Utilizing percentages makes it easier to read and understand data.

In the scenario, I would use both reports, horizontal and vertical. Both of these reports do have their downsides. Horizontal analyses only implement time periods. If you were to analyze different quarters, these comparisons may alter the reality of what your business is actually doing. If you compare a quarter to a previous quarter, that only shows the growth dependent on that specific year, whereas if you compare annually, these results vary very drastically. Vertical analyses utilize percentages but does not answer a question nor give the reviewer a confirmed decision. Vertical analyses rarely give an answer, but they do let people get to the questions they should be asking to improve their company.

Borad, S. B. (2019, August 13).Vertical Analysis Meaning, Benefits, Disadvantages And More. efinancemanagement.com/financial-analysis/vertical-analysis

(n.d.).Horizontal Analysis vs. Vertical Analysis: What's the Difference?. Indeed.com. www.indeed.com/career-advice/career-development/horizontal-analysis-vs-vertical-analysis

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