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 ... in Public bookmarkswith abnormalanalysischangeshelpshorizontalidentifyillustrationtime