Last Updated 17 Aug 2020

# Ratio, Vertical & Horizontal Analyses

Category Investment, Money
Words 345 (2 pages)
Views 328

There are three ways internal and external users of a company can analyze financial statements. They include vertical analysis, horizontal analysis, and ratio analysis (Weygandt, Kimmel, & Kieso, 2008). The vertical analysis is a technique that expresses each financial statement as a percent of a base amount (Weygandt, Kimmel, & Kieso, 2008).

Horizontal analysis, or trend analysis, is how one can evaluate the financial statement over a specific period of time (Weygandt, Kimmel, & Kieso, 2008). With the horizontal method, an increase or decrease in assets liabilities or stockholders' equity can be determined (Weygandt, Kimmel, & Kieso, 2008). This can be expressed as a percentage or by total amounts and is primarily used for intercompany comparison (Weygandt, Kimmel, & Kieso, 2008).

The ratio analysis utilizes three different comparisons for financial statements such as industry average comparisons, intracompany comparisons, and intercompany comparisons (Weygandt, Kimmel, & Kieso, 2008). A ratio conveys the mathematical relationship by means of a percentage, a rate, or a proportion (Weygandt, Kimmel, & Kieso, 2008). It also measures a company’s financials in terms of liquidity, profitability, and solvency (Weygandt, Kimmel, & Kieso, 2008).

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PepsiCo, Inc.

2005- Current ratio is 1.11%. Current assets of \$10,454 and current liabilities of \$ 9,406 (in millions). 2004- Current ratio is 1.28% with current assets of \$8,639 and current liabilities of \$6,752 (in millions). 2005- vertical analysis: 0.054% with \$1,716(cash equivalents) \$31,727 (total assets) 2004- vertical analysis: 0.05% with \$1,280 (cash equivalents) and \$27,987 (total assets) 2005- vertical analysis: 0.1% with \$3,166 (short term investments) \$31,727 (total assets) 2004- Vertical analysis: 0.08% with \$2,165 (short term investments) \$27,987 (total assets) Horizontal analysis: Total change in assets by percentage from 2005 (\$10,454) to 2004 (\$8,639) is 1.21% Horizontal analysis: Total change in current liabilities from 2005 (\$9,406) to 2004 (\$6,752) is 1.40%

Coca-Cola Company

2005- Current ratio is 1.04%. Current assets of \$10,252 and current liabilities of \$ 9,836 (in millions). 2004- Current ratio is 1.10%. Current assets of \$12,281 and current liabilities of \$11,133 (in millions). 2005- vertical analysis: 0.16% with \$4,701 (cash equivalents) \$29,427 (total assets) 2004- vertical analysis: 0.21% with \$6,707 (cash equivalents) and \$31,441 (total assets)

2005- vertical analysis: 0.002% with \$66 (marketable securities) \$29,427 (total assets) 2004- Vertical analysis: 0.002% with \$61 (marketable securities) \$31,441 (total assets) Horizontal analysis: Total change in assets by percentage from 2005 (\$10,250) to 2004 (\$12,281) is 0.83% Horizontal analysis: Total change in current liabilities from 2005 (\$9,836) to 2004 (\$11,133) is 0.88%

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