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Phoenix Week7: Ratio, Vertical, and Horizontal analysis

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Phoenix Week 7-Rao, Vercal, and Horizontal analysis
The three tools of nancial statement analysis are the horizontal analysis, vercal analysis, and
rao analysis. These three tools help to evaluate the nancial condion of a business. The
horizontal analysis, or trend analysis, evaluates a series of nancial data over a period of me. It
is primarily used in intercompany comparisons, with the purpose of determining increases or
decreases in specic items over a me period of 2 or more years. These changes can be
expressed either as an amount, or a percentage. The vercal analysis, or common-size analysis,
expresses each item in the nancial statement, as a percentage of a base amount. Vercal
analysis can show percentage changes individual assets, liabilies and stockholders equity. A
benet of the vercal analysis is being able to make comparisons of companies of di*erent sizes.
The rao analysis expresses the relaonship among selected items in a nancial statement. This
relaonship is expressed in the form of a percentage, rate, proporon . Rao analysis can be
used to evaluate liquidity, protability, and solvency in addion to providing red +ags that my
not be apparent at rst glance. PepsiCo, Inc.
Appendix A
The current rao for 2005 = 1.11%
$10,454 current assets
$ 9,406 current liabilies
The current rao for 2004 = 1.28%
$8,639 current assets
$6,752 current liabilies
Two measures of vercal analysis
2005-total current assets are 33% of total assets
10,454 current assets
31,727 total assets

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2004-total current assets are 31% of total assets
8,639 current assets
27,987 total assets
Two measures of horizontal analysis
Total current assets 2005 =10,454
Total current assets 2004 = 8,639
The total increase in 2005 is 1,815
Divided by the base year is 8,639 = 21% increase in assets from 2004 to 2005
Total current liabilies 2005= 9,406
Total current liabilies 2004=6,752
The total increase in 2005 is 2,654
Divided by the base year is 6,752= 39% increase in liabilies from 2004 to 2005
This analysis shows PepsiCo Inc. has an increase in assets of21% from 2004 to 2005, with an
increase in liabilies of 39 percent from 2004 to 2005.
Coca-Cola Appendix B
The current rao for 2005 = 1.04%
$10,250 current assets
$ 9,836 current liabilies
The current rao for 2004 = 1.10%
$12,281 current assets
$11,133 current liabilies

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?Phoenix Week 7-Ratio, Vertical, and Horizontal analysis The three tools of financial statement analysis are the horizontal analysis, vertical analysis, and ratio analysis. These three tools help to evaluate the financial condition of a business. The horizontal analysis, or trend analysis, evaluates a series of financial data over a period of time. It is primarily used in intercompany comparisons, with the purpose of determining increases or decreases in specific items over a time period of 2 or more years. These changes can be expressed either as an amount, or a percentage. The vertical analysis, or common-size analysis, expresses each item in the financial statement, as a percentage of a base amount. Vertical analysis can show percentage changes individual assets, liabilities and stockholders equity. A benefit of the vertical analysis is being able to make comparisons of companies o ...
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