What is vertical and horizontal analysis?

Horizontal analysis is the process in which an analyst compares ratios or line items in a company's financial statements over a certain period of time while vertical analysis refers to the process by which analysts categorizes assets, liabilities and equities as a proportion of the total account in a balance sheet

Vertical Analysis'

A method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a proportion of the total account. The main advantages of vertical analysis is that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy to see relative annual changes within one business.

Horizontal Analysis'

A procedure in fundamental analysis in which an analyst compares ratios or line items in a company's financial statements over a certain period of time. The analyst will use his or her discretion when choosing a particular timeline; however, the decision is often based on the investing time horizon under consideration.