The Two Major Forms of Common-Size Analysis Are Horizontal Analysis

question 19

Essay

The two major forms of common-size analysis are horizontal analysis and vertical analysis. What type of information or insights can be obtained by using these two techniques of financial statement analysis? Explain how the output of horizontal analysis and vertical analysis can be compared to industry averages and/or competitive companies.

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Definitions:

Absorbed

generally refers to the process by which substances are taken up into another substance, for example, nutrients being absorbed by the body's cells.

Chylomicrons

Protein-covered fat droplets produced in the intestinal cells; they enter the lymphatic system and are transported to the blood.

Regulatory Molecules

Substances such as hormones or neurotransmitters that control or regulate the activity of cells or organs in the body.

Energy Metabolism

The set of chemical reactions that occur within a living organism to convert energy from food into a form that cells can use.