Horizontal and vertical analysis are two key techniques used in analyzing financial statements, usually applied in tandem. Briefly stated, vertical…

Horizontal and vertical analysis are two key techniques used in analyzing financial statements, usually applied in tandem. Briefly stated, vertical analysis requires that a significant element be measured as a percentage of a base to which it is related. For example, the various components of an income statement might be measured as a percentage of sales. This technique can be applied to the balance sheet as well.