Horizontal Analysis

Analysts use horizontal analysis to gauge trends in a business by evaluating key line items in a company’s financial statements (cash flow, income, inventory, debt coverage etc) over a range of time periods. As well as getting a sense for the business fluctuations of a company over time, horizontal analysis is also useful to determine how companies in a cross-company sector sample respond to the same set of underlying factors and events, accounting for seasonality and other growth drivers.