Horizontal And Vertical Analysis

HORIZONTAL ANALYSIS METHOD
Horizontal Analysis
Methods of financial statement analysis generally involve comparing certain information. The horizontal analysis compares specific items over anumber of accounting periods. For example, accounts payable may be compared over a period of months within a fiscal year, or revenue may be compared over a period of several years. These comparisons areperformed in one of two different ways.
PURPOSE OF THE ANALYSIS
 The purpose of this analysis is to examine the behavior (growth or decline) of the items in the financial statements.
 It thencalculated the percentage that have changed the various items. Indicators of horizontal analysis, the data are calculated by dividing the most recent year, between the corresponding figure last year andsubtracting 1.
 Through analysis of horizontal you can study the behavior of a particular item and identify with other types of analysis (internal or external causes), the origins of thesevariations.
 Some of these analyses can be done about the history of the company, the ability of business management and the process of accumulation of productive capital in the company.
BALANCE SHEETAssets:
 Heineken increased both fixed and non-current assets from 2004 to 2005.
 The raise was consistently focused on fixed assets, with a relevant investments in plant and machinery and intangibleassets.
 That is explained by the acquisitions that the company has made during the year.
EQUITY AND LIABILITIES
 The statement shows how Heineken financed its increased investment.
 Theydecided to increase the share of equity and decrease the long term liabilities.
 This means that to invest they preferred to ask money to the stock-holders rather than to the higher expensive bankloans.
 In facts that was a decrease of the non-current liabilities (by 11%) and a huge augment of the equity of 20%.
 There was actually also a massive boost in current liabilities by 23.4%....