Ratio, Vertical, and Horizontal Analysis Check Point
Brandy McDonald
Principles of Accounting
February 24, 2012
Vaunda Davis

Ratio, Vertical, and Horizontal Analysis Check Point
The three vital tools of financial statements are the ratio, vertical, and horizontal analysis. Each financial statement examines the data within monetary statements of businesses or organizations. Being able to determine the financial stability of a company is important in addressing any areas of weakness or aide in the decision making processes. Ratio analysis is associated with evaluating the liquidity, profitability, and solvency of a corporation to judge performance scenarios. Vertical analysis gauges entries for assets, liabilities, and equities in a balance sheet to compare the proportions of the total account. It enables any size of a business the opportunity to easily compare relative annual changes. Horizontal analysis allows companies to compare performance ratios over a certain period of time, usually one year’s worth of entries. It is also referred to as trend analysis and offers insight into the overall success of a company in order to make sound investments. These types of ratios are able to be used on any item of finance from revenues to earnings within a company.
PepsiCo, Inc.
The Current Ratio for 2005 is Current Assets 10,454/ Current Liabilities 9,406 which equals 1.11%.
The Current Ratio for 2004 is Current Assets 8,639/ Current Liabilities 6,752 which equals 1.28%.
Two measures of vertical analysis are:
Vertical Analysis of 2005- Total Current Assets at 10,454 divided by Total Assets at 31, 727 equals 33%.
Vertical Analysis of 2004- Total Current Assets at 8,639 divided by Total Assets at 27, 987 equals 31%.

Two Measures of Horizontal Analysis are:
Horizontal Analysis #1- Current Assets of 2005 at 10,454 divided by Current Assets in 2004 at 8,639