The major differences between horizontal analysis and vertical analysis of financial statements are as follows −
- Its main aim is to compare line items to calculate the changeover the time.
- In this, information is compared line by line to make decisions.
- It is useful when financial results of current/targeted years are compared with previous financial years.
- It states the growth/decline of an item.
- It tells about changes in items over time.
- It is used in intra comparison.
- It is used in income statements, balance sheets, and retained earnings statements.
- It includes long term planning.
- Its main purpose is to compare changes in percentages.
- In this, each line item is compared with another item in terms of percentages to make decisions.
- It is useful when the results are compared with competitors.
- It states forecasting and determining the relative proportion of an item.
- It tells about the proportion of items to common items in a single year.
- It is used in both infra and intercomparisons.
- It is used in income tax, sales figures and operating costs.
- It includes short term planning.