ACC 281 Week 3 Methods of Analysis

May 7th, 2015
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ACC 281 Week 3 Methods of Analysis

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Methods of Analysis NameACC281: Accounting Concepts for Health Care ProfessionalsMethods of AnalysisThe three methods of methods of analysis are horizontal, vertical, and ratio. Horizontal analysis provides you with a way to compare your numbers from one period to the next, using financial statements from at least two distinct periods. Each line item has an entry in a current period column and a prior period column. Those two entries are compared to show both the dollar difference and percentage change between the two periods. A vertical analysis shows you the relationships among components of one financial statement, measured as percentages. On your balance sheet, each asset is shown as a percentage of total assets; each liability or equity item is shown as a percentage of total liabilities and equity. On your statement of profit and loss, each line item is shown as a percentage of net sales. Ratio analysis is used to evaluate relationships among financial statement items. The ratios are used to identify trends over time for one company or to compare two or more companies at one point in time. Financial statement ratio analysis focuses on three key aspects of a business: liquidity, profitability, and solvency.Horizontal analysis is performed in one of two different ways. The first way is called the absolute dollar this analysis compares the absolute dollar amounts of certain items over a period of time. For example, this method would compare the actual dollar amoun

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