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Page 1

Horizontal Analysis

1. Calculate the dollar amount of change from the earlier (base) period to the later period

2. Divide the dollar amount of change by the base period amount

Increase (Decrease)

During Year 3 During Year 2

Year 3 Year 2 Year l Amount %

Amount %

Sales $120 000 $100 000 $80

000 $20 000 20% $20 000 25%

Net profit $12 000 $8 000 $10

000 $ 4 000 50% (2 000) (20%)

An analysis of the percentage

change in the net sales figure over time improves our ability to use the

dollar amounts.

It is more useful to know that sales have increased by 20% than

to know that the increase in sales is $20, 000.

Page 2

Vertical Analysis