Question

Please provide a response to the following questions:

• What is common sizing/vertical analysis and what is its importance in data analysis and forecasting?
• What is trend/horizontal analysis and what is its importance in data analysis and forecasting?

In addition, please complete the following problems. Submit your work in a table format in MS Word or MS Excel.

Round to the nearest whole percentage (i.e., do not round to any decimal places). Every single box below should have a value provided in it.

Perform common sizing/vertical analysis for the assets of Hospital A and Hospital B.

	Hospital A	%	Hospital B	%
Current Assets	$10,000,000		$18,000,000
Property, Plant and Equipment	$100,000,000		$7,000,000
Other Assets	$50,000,000		$12,000,000
Total Assets

Perform trend/horizontal Analysis for the Assets of Hospital A.

Hospital A	Year 1	Year 2	$ change year 1 to 2	% Change year 1 to 2	Year 3	$ change year 2 to 3	% Change year 2 to 3
Current Assets	$10,000,000	$18,000,000			$15,000,000
Property, Plant and Equipment	$100,000,000	$107,000,000			$110,000,000
Other Assets	$50,000,000	$12,000,000			$35,000,000
Total Assets

Answer 1

Common sizing/vertical analysis involves denoting each line item on the income statement as a percentage of the total revenue and each line item on the balance sheet as a percentage of the group total such as total assets or total liabilities, equity. Vertical analysis is useful in data analysis and forecasting as it compares data line item-wise over more than one period and aids in forecasts based on the percentages.

Trend/horizontal analysis shows the percentage change in a line item in a period as compared to another period. It can be used for comparing data for multiple periods and determining an increasing or decreasing trend.

Common sizing/Vertical analysis:

	Hospital A	%	Hospital B	%
Current assets	10000000	6	18000000	49
Property, plant and equipment	100000000	63	7000000	19
Other assets	50000000	31	12000000	32
Total assets	160000000	100	37000000	100

Trend/horizontal analysis:

Hospital A	Year 1	Year 2	$ change Year 1 to Year 2	% change Year 1 to Year 2	Year 3	$ change Year 2 to Year 3	% change Year 2 to Year 3
Current assets	10000000	18000000	8000000	80	15000000	-3000000	-17
Property, plant and equipment	100000000	107000000	7000000	7	110000000	3000000	3
Other assets	50000000	12000000	-38000000	-76	35000000	23000000	192
Total assets	160000000	137000000	-23000000	-14	160000000	23000000	17