In the process of analyzing the financial statements of an enterprise, specific techniques and methods are used. One of the most important is the horizontal analysis of the absolute items of the balance sheet. This method involves studying the indicators of the enterprise's reporting for a certain period, calculating the rate of their change and evaluating the indicators obtained.
Instructions
Step 1
In order to conduct a horizontal analysis of the balance sheet or annexes to it, for example, a profit and loss statement, build an analytical table. In it, you will calculate the absolute changes in each of his articles, calculate the relative growth rates. Based on the data obtained, you can draw a conclusion about the trend of the hotel balance sheet items and about its dynamics in general.
Step 2
In the process of horizontal analysis, first of all, study the dynamics of enterprise assets, changes in their composition and structure, give them an assessment. Specify how their value has changed as a whole, due to which there was an increase or decrease. Then analyze the dynamics of current and non-current assets, how these items affected the change in total assets. Specify their composition, due to which there was a decrease or acceleration in the growth rate of current and non-current assets. Make a conclusion about which items of assets have the greatest impact on the change in the balance sheet currency.
Step 3
Next, analyze the dynamics of liabilities and their change. Start by assessing the amount of liabilities as a whole, compare with the indicators of previous periods. Highlight the most changed items, how they influenced the growth or reduction of the total liabilities in general. Specify what caused the change in equity and debt capital, including long-term and short-term. Highlight the most significant items that led to significant changes in the volume of liabilities.
Step 4
In the process of horizontal analysis, associate the change in absolute indicators with the situation in the enterprise. Remember that the balance is fair if the total tends to increase. At the same time, the growth rate of non-current assets should be lower than the growth rate of current assets. Equity capital should grow at the fastest rate in the liabilities of the balance sheet. Its value should be higher than borrowed funds. The growth rates of receivables and payables should be approximately the same.
