Horizontal analysis can help you to have a better overview of a company you are considering investing in.
Horizontal analysis is a method used by accountants to figure out the performance trend for a company or other kinds of businesses. Whether the company is making a profit or not, throughout a specific period, can be revealed by a horizontal analysis. This tool utilizes historical data and a line-by-line comparison to compare the totals. For instance, assume that you're going to invest in the company EFG. You can see in the picture below that company EFG's net income grew by 50%, while its retained earnings grew only 8% over a period. This way of determining the trend is called horizontal analysis, and the more periods you compare, the more reliable your results will be.
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