WEEK 3: HORIZONTAL AND VERTICAL ANALYSIS --> ACCT-301: Class.
Which do you think is more useful: horizontal and vertical analysis or ratio analysis, and why?
Vertical Analysis: vertical Analysis is nothing but analysis of any amount of financial statement in relation to another amount.For example, every Item of balance sheet is divide by the total assets, which gives the percentage of such item in relation to a particular item called total assets. In the same way, for Income Statement every item can be divided by total sales for performing Vertical Analysis.
Horizontal Analysis: It can be described as a ratio arrived by divison of current year amount with the previous year amount of the same item. it basically means comparitive ratios or trend analysis in as per accounting terms.
Ratio Analysis: This can be described as quantitative analysis of all items in the financial statements. This analysis can be used to know the operating effectiveness of the entity, efficiency, liquidity status of the company and also the profitability. there are various types of ratio analysis that can be performed on financial statements. Some of them are Quick assets ratio, Assets turnover ratio, Cash ratio etc..
In my opinion ratio analysis are more useful because, Vertical and Horizontal Analysis might not give fruit ful results in all cases ending up with percentages which may give meaning less ratios. Where as, in Ratio Analysis many decisions can be taken just depending on the ratios, such as return on Investment ratio , which is one of the profitability ratio, which helps the management of the entity in taking quick decisions. It also helps to Identify the problem of the entity very easily, for example low liquidity ratio, which depicts entity is not in good health. Since, many of the companies perform ratio analysis, it willbe useful for comparision of ratios with other entities which are available ready made.
As every coin has two sides, there are limitations also of ratio analysis, which might end up by just window dressing of financial statements.
WEEK 3: HORIZONTAL AND VERTICAL ANALYSIS --> ACCT-301: Class. Which do you think is more useful:...
WEEK 3: HORIZONTAL AND VERTICAL ANALYSIS - Class: ACCT-301 What is meant by the term information overload? Did you feel some information overload when you went to Yahoo! Finance? Why or why not? Or just --> What is meant by the term information overload?
WEEK 3: RATIO ANALYSIS AND LIBRARY RESEARCH TASK - Class: ACCT-301 Please name and give the formula for one of the liquidity ratios. Describe what this ratio can tell you.
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Horizontal and vertical analysis is a great tool. Do you think it's more beneficial if amounts are expressed in dollar amounts or percentages?
which analysis or ratio you feel is most useful. Do you think you will look at a company’s earnings per share (EPS), price earnings ratio (PE Ratio), or dividends, before you invest in a company’s stock?
Class: ACCT 301 How has accounting been a part of your life in the past? How do you think accounting will be part of your life in the future? Example?
1. Computing ROE and ROA: Both ROA and ROE measure profitability. Which one is more useful for comparing two companies? Why? 2. (Graded) Ratio Analysis: Consider the ratio EBITD/Assets. What does this ratio tell us? Why might it be more useful than ROA in comparing two companies? 3. Return on Investment: A ratio that is becoming more widely used is return on investment. Return on investment is calculated as net income divided by long-term liabilities plus equity. What do you think return on...