Week 6 Horizontal and Vertical analysis of a balance sheet Discussion

Product Analysis (2000 words)
September 16, 2020
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September 16, 2020

Week 6 Horizontal and Vertical analysis of a balance sheet Discussion

Answer or comment on the discussion post in 100 word count.. reply to all 8 questions and keep them numbered and in order

Week 6 Discussion 1

Provide examples of when the following would be helpful:

1)A horizontal analysis of a balance sheet

2)A vertical analysis of a balance sheet

3)By Monica..Horizontal analysis and Vertical Analysis,

We use the vertical analysis to demonstrate the relation in sizes between the different accounts that appear in a financial statement in terms of percentages. That’s mean that when we do a vertical analysis on the income statement, we must show the top sales number as a 100% while the other accounts will be shown as a percentage of the total sales number. The vertical analysis will help me to understand the level of each account compares to the total sales.

When we work on the balance sheet, the account that will represent the 100% will be the total assets. All other accounts will be a percentage of that big total number that is our 100% assets.

4) By Quan: Helpful examples of Horizontal Analysis

Horizontal analysis is the comparison of historical financial information over a series of reporting periods, or of the ratios derived from this information. It is used to see if any numbers are unusually high or low in comparison to the information for bracketing periods, which may then trigger a detailed investigation of the reason for the difference. It is very helpful to see what has been driving a company’s financial performance over a number of years, as well as spotting trends and growth patterns such as seasonality. It enables analysts to assess relative changes in different line items over time, and project them. For example, Apple can look at the horizontal analysis and easily see that the profit from selling Macbook Air is no longer sustainable so they need to remodel it or replace it with a new product that better suit customer’s desires.

Week 6 Discussion 2 questions

5) Balance Sheet

6)Describe an example of how you use percentages for your job or in your personal life.

7) Percentage used in sports

Watching football yesterday, I noticed a lot of percentages used when comparing coaches and players. For example, the most winning coach has XX% but you will always notice an asterisk on the bottom indicating minimum years needed. A coach who has a winning percentage of 80% after 1 year should not be compared to a coach who has been coaching for 20 years. I was thinking of how we use this in work and the best example I can think of is when we do our monthly rankings at the end of the year, the employee has to have been with us for at least 6 months for their percentage to be considered when doing the rankings.

8) Evaluating Products..

Greetings!

I found this week’s exercises interesting, because it made me evaluate the efficiency of my decision making process. According to a study by Sevilla, Isaac, and Bagchi (2018) consumers are overly over reliant on nominal values when encountering percentage information. It is easier for the general public to understand a ranked evaluation or marketing statement of a product, while they often misunderstand a percentage-based statement, although the consumer often does not take set size into account. An example might be a claim of we’re number 1. While that is easy to understand, as far as rank, it is important to understand number 1 out of how many. Ranking high in a broad based set that includes other reliable companies means more than ranking number 1 in a set that includes inappropriate categories (comparing apples to oranges, if you will), or a biased population, only choosing competitors that have inherent disadvantages while not including legitimate competitors. Part of the issue might be traced to the lack of math ability/critical thinking on the part of the consumer (Sevilla, Issac, & Bagchi, 2018).

 

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