• Analytical Tools in Financial Modeling - Horizontal Analysis
  Horizontal analysis helps identify abnormal changes over time, look at the illustration below. Also known as Trends Statements, horizontal analysis may be performed in a financial model by means of: Long-term trends - growth rate for a 10 year period Year-to-year changes - indexed or percent changes Geometric growth rates - compound annual growth rates (CAGR) Horizontal analysis, whilst simple to execute and useful to a certain extent, has its limitations. These limitations include: Being highly dependent on the selection of base year and the period under examination in the financial model. Horizontal analysis provides little insight into why the trend occurred in a financial model. Horizontal analysis does ...
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