Enter the total value in the previous year or comparison year and the total value in the base year into the calculator to determine the horizontal analysis.
Horizontal Analysis Formula
The following formula is used to perform a horizontal analysis.
HA = (VCY – VBY) / VBY * 100
- Where HA is the horizontal analysis (%)
- VCY is the value in the comparison year
- VBY is the value in the base year
Horizontal Analysis Definition
A horizontal analysis is a financial analysis of value of an income statement from a base year to comparison year.
Let’s take a look at an example problem. Let’s assume we have a certain asset class that produce $100,000.00 on average. This will be our base year value. Next, we decide we want to compare how the previous year performed to the average. After looking over income statements we find this same asset produced $150,000.00 in the past year. We want to perform horizontal analysis, so using the formula above we find, (150,000 – 100,000 ) / 100,000 * 100 = 50%. The past year was a 50% increase over average.
A horizontal analysis is a type of analysis of an income statement that compares previous years to a base year. In other words, how a certain asset is performing compared to a base year or time period.