Horizontal Analysis and Vertical Analysis,including the Preparation of Common-Size Financial

question 123

Essay

Horizontal analysis and vertical analysis,including the preparation of common-size financial statements,are important analytical techniques used to evaluate the strength of published financial statements.
a_Define:
1) Horizontal analysis
2) Vertical analysis
3) Common-size financial statements b_How is each of these techniques helpful in the analysis of financial statements?

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Definitions:

Equity Financing

The process by which a company raises capital through the sale of shares.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.

Noncash Expense

Expenses recorded on an income statement that do not involve a direct cash outflow, such as depreciation or amortization.

Traditional Income Statement

A financial statement that displays a company's revenues, expenses, and net income over a specific period, typically emphasizing historical cost accounting.