1. Financial Statement Analysis
Vertical Analysis
Horizontal Analysis
Ratio Analysis
Limitations on Financial Statement Analysis

2. Vertical Analysis
Compares each element in the statement to a base number
In the income statement, the base is net revenue
In the balance sheet, the base is total assets
Analyze the trend of each element over the five year period

3. Horizontal Analysis
Compares each element in the statement to that same element in the statement of the previous year
Where vertical analysis shows the relative value of each element to the base number, horizontal analysis shows the rate of change in the element
Analyze the trend of each element over the four year period

4. Ratio Analysis Refer to the reading describing various ratios
Note the current elements in the balance sheet

5. Limitations of Statement Analysis
References to net income
Historical cost vs current values
Elements not reflected in the financial analysis