Instruction

1

Determine what sections and articles of the balance you'll consider the horizontal analysis. Suppose it will be assets, liabilities, income statement and cash flow. The analysis algorithm is fairly simple, the calculations can be performed easily in a tabular form, making the results more visual.

2

Make four tables with five columns each. In the first column write down the balance sheet, second and third data for reporting and base periods. The fourth and fifth columns allow for the recording of the results of the analysis, namely the absolute and relative deviation.

3

Label the first table "Assets", fill in the first column. For example, cash, securities, fixed assets (buildings, equipment, depreciation), investments, short-term and long-term investments, advances to suppliers of equipment or materials, etc.

4

Head of balance sheet data in the accounting and basic periods. These periods should correspond to each other: the calendar year, the same quarter of different years or month, e.g., June 2010 and 2011 etc.

5

Fill in the column "Absolute deviation". To do this, calculate the difference between the values of each row by subtracting the second column from the third. In other words, the absolute deviation shows how the numbers have changed compared to the similar period in the past. The value can be either positive, i.e. directed upward, or negative.

6

Divide the data of the third column to the second, respectively, on each line, multiply the results by 100 and record in the fifth and final column. Title it "Relative deviation"; this column shows the percentage change of the same data. The increase in this case shows the value of calculated values greater than 100%.

7

Do the same with the other three analytical tables: liabilities (short-term and long-term liabilities, credits/loans, etc.), the income statement (sale of assets, labor cost, overhead costs, material costs, dividends, interest, taxes, etc.) and report of cash flows (receipt/payment of dividends, sale/purchase of assets, repayment of loans and Bank loans, etc.).

8

Add in each table totals row that contains the data for all the analyzed articles. Use a computer program to facilitate calculations and acceleration for horizontal analysis, such as Microsoft Excel.