Vertical analysis and horizontal analysis both are done on financial statement. Both are needed for finding correct financial position. But there is the basic difference which we are explain in following lines.
Meaning
Vertical analysis is done on the basis of same balance sheet's item. We take one item of balance sheet item and calculate its % in total item.We take the total asset as 100 and calculate the % of each item out of total asset by dividing each item with total asset and multiply 100. This is also called comparative balance sheet.
In horizontal analysis, we compare one company's balance sheet with other company's balance sheet.
Vertical Income Statement Vs Common Size Income Statement
In vertical analysis, we convert original income statement in vertical income statement by finding each item %. We show total sale as 100. For example, total sale is Rs. 100000. Total cost of goods sold is Rs. 60000. Then Cost of goods % will be 60000/100000 X 100 = 60% Now, we compare this cost of goods sold with past year's cost of goods sold's %. In common size income statement, we compare one company's income statement with other company's income statement.
Meaning
Vertical analysis is done on the basis of same balance sheet's item. We take one item of balance sheet item and calculate its % in total item.We take the total asset as 100 and calculate the % of each item out of total asset by dividing each item with total asset and multiply 100. This is also called comparative balance sheet.
In horizontal analysis, we compare one company's balance sheet with other company's balance sheet.
Vertical Income Statement Vs Common Size Income Statement
In vertical analysis, we convert original income statement in vertical income statement by finding each item %. We show total sale as 100. For example, total sale is Rs. 100000. Total cost of goods sold is Rs. 60000. Then Cost of goods % will be 60000/100000 X 100 = 60% Now, we compare this cost of goods sold with past year's cost of goods sold's %. In common size income statement, we compare one company's income statement with other company's income statement.
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