Horizontal analysis is a financial statement analysis method that presents changes in the amounts of financial statement items over a period of time.

A horizontal analysis normally shows changes both in dollar amounts and percentage amounts.

Horizontal analysis of financial statements can be performed on any of the items in the income statement, balance sheet, and cash flow statement.

A horizontal analysis uses only one period of information.

Only the horizontal analysis of the income statement determines the dollar amount of change and the percentage amount of change for two or more periods.

Vertical Analysis is a method of analyzing financial statements that shows each item on a statement as a percentage of a base figure within the statement.

A vertical analysis of a balance sheet uses the total sales as a base figure.

A vertical analysis of an income statement uses the sales figure as the base and all other components of the income statement are shown as a percentage of sales.

Common size financial statements allow users to make comparisons to competitors or industry averages

Common size analysis is good tool for comparing companies of different sizes in the same industry.