Introduction:
Horizontal Percentage Analysis
• Horizontal Percentage Analysis is a technique of performance measurement and evaluation where the performance of the current year is compared to that of a base year and the direction of the results are analyzed.
• The movement of the results can be interpreted as a positive or favorable Horizontal movement or as a negative or unfavorable Horizontal movement
• Favorable Horizontals mean increase in revenues and decrease in costs and are hence subjective in nature. Unfavorable Horizontals mean decrease in revenues and increase in costs and are also subjective in nature.
• Horizontal analysis helps in evaluation of repetitive behavior as well as evaluation of effectiveness of strategies implemented by allowing analysis of performance over time.
• The following formula is used to calculate Horizontal percentage for each year:
To Calculate:
Annual Dollar changes and Percentage changes in each of the accounts.
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