Question

How would you do a horizontal analysis, vertical analysis and ratio analysis for IBM? Can someone an example of this? Can it be done for years 2016 and 2017?

Answer 1

Answer)

Horizontal analysis is an analysis of comparing changes in financial statements.Vertical analysis is comparing same year expenditure for knowing the percentage of one expense as compared to another.Ratio analysis can be done with different formula for the ratios ratios you need to know.However for this you need to have financial statements of IBM.

Example for horizontal analysis:

Suppose for xltd. the purchase for year 2017 is $20000 whereas the purchases in year 2016 is $16000 then the percentage in current period as compared to previous year:

$20000/$16000×100=125%

Example for vertical analysis:

Suppose the cost of goods manufactured is $10000 which consists of $6000 purchase,$2000 labour and $2000 manufacturing overhead all in a particular period,the vertical analysis is done as follows:

Percentage of purchase in COGS:$6000/$10000×100=60%

Example for ratio analysis:

Here for example I want current ratio of xltd who have cash balance of $500,inventory of $700 and $300 of investments and creditors for $1000 then carrentvratio :

Current assets/current liabilities:($500+$700+$300)/$1000=1.5 times.

Yes it could be done for years 2016 and 2017 provided you have 2016 and 2017 financial statements of IBM.