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Most analytical measures are expressed as percentages or ratios. This allows easy comparison with other businesses regardless of size. Horizontal and vertical analyses express entire financial statements in percentages. The horizontal analysis is an analysis of the rate of change in items of financial statements form year to year. The vertical (or common size) analysis presents each item as a percentage of total assets for the balance sheet and sales for income statement. When using these analytical measures, one should take the following factors into consideration: 1) industry trends, 2) changes in price levels, and 3) future economic conditions.
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