The process of dividing each expense item of a given year by the same expense item in the base year. It allows assessment of changes in the relative importance of expense items over time and the behavior of expense items as sales change.
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In fundamental analysis, the comparison of a financial ratio or some other benchmark to the same ratio or benchmark for a different period of time. For example, horizontal analysis may investigate whether a company's earnings have gone up or down over a given quarter or year. Horizontal analysis may be used in making investment decisions to determine a company's financial health. In general, a horizontal analyst chooses a timeframe to match the timeframe of a possible investment.
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Comparison of financial statements or specific items in a financial statement that covers two or more periods. Compare vertical analysis.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.