This lesson explores horizontal, vertical, and common-size analysis techniques for evaluating trends and comparing performance across periods and companies .

7.1 Horizontal and Vertical Analysis

These are foundational techniques for analysing financial statements. The Swayam course covers both horizontal and vertical analysis in Week 2 .

• Horizontal Analysis: Compares financial data across periods, calculating dollar and percentage changes in each line item. This is used to identify trends.

• Vertical Analysis: Expresses each line item as a percentage of a base figure. For the income statement, this is typically revenue; for the balance sheet, total assets. This allows comparison of cost structures and asset composition.

7.2 Common-Size Financial Statements

Common-size financial statements are created by applying vertical analysis . This standardisation enables comparison across companies of different sizes and across periods. It is a key tool for identifying differences in operating structure or cost management. The University of Bologna course covers common-size analysis . The Blackbird Training course covers common-size statements as part of its foundation in financial analysis .

7.3 Application of Techniques

The Swayam course covers interpretation and problem-solving for these techniques, highlighting their practical use . The Blackbird Training course covers using these techniques to assess financial health and performance . The Coursera Specialization covers horizontal and vertical analysis techniques .