What is a horizontal analysis. Analysis of the accounting balance of the enterprise. Vertical and horizontal tests. The essence and determination of the vertical balance analysis

Economic analysis uses various techniques that imply the calculation and evaluation of not only absolute, but also relative indicators in which the horizontal, vertical and trend analysis belonging to statistical methods, factor analysis (as a view of the heuristic method with quantitative calculations based on expert assessment) and the calculation of coefficients (as a type of economic and mathematical modeling).

Under vertical analysis It is understood as the presentation of data on the economic and economic activity of the company in the form of relative indicators through the proportion of each article in general, and assess their change in the dynamics (Table 2.3). Therefore, vertical analysis is also called structural.

Relative indicators smooth inflation influence, which makes it possible to objectively objectively evaluate the changes.

Table 2.3

Vertical accounting balance

Vertical analysis data allow, for example, to assess the structural changes occurring in the composition of assets, liabilities, changes in other reporting indicators, the dynamics of the share of the main elements of the organization's income, product profitability coefficients, etc. Therefore, for the purposes of vertical analysis, you can use not only the final, but also intermediate reporting. When conducting a vertical analysis of the balance sheet, the shares of each article in the balance sheet currency (total amount of assets or liabilities) are calculated, and when analyzing the report on financial results, the shares of each article in the revenue indicator. Then it is advisable to pay attention to how the values \u200b\u200bof these fractions change during the reporting period. In addition, but the data of the vertical analysis is convenient to compare the reporting of companies that differ strongly different in the absolute value.

Since the balance sheet contains information about the composition of the company's assets and sources of their formation, it is useful to compare absolute values \u200b\u200bby its sections. It is determined which part of non-current and current assets (sect. I and II) is covered at the expense of own funds and long-term borrowing (Section III and IV), and what resources are funded by short-term obligations.

The sign of the financial well-being of the company is considered to respect the following balance sheet proportions:

• The most liquid assets (they include cash and short-term financial investments) should cover the most urgent obligations (payables) or exceed them;
• rapidly realized assets (usually they include receivables, deposits) should cover short-term liabilities (loans and loans, the maturity of which will come soon);
• Slowly realized assets (for example, stocks) should cover long-term liabilities (loans and loans, whose repayment period will not come soon);
• It is difficult to implement assets (usually they include land, buildings, equipment) should be covered with permanent liabilities (own means) and not exceed them.

The basis of these comparisons is the grouping of the company's assets in the degree of liquidity - their ability to go to the cash and serve as a means of repayment of obligations. In general, the accounting balance provides limited opportunities for such a grouping, as many articles in it are rolled.

During the vertical analysis, the structure of liability or sources of financing is also evaluated. Previously, it was common that the share of attracted funds in the balance sheet should not be higher than 50%. Now many economists recognize that borrowed funding may be more profitable than the increase in its own funds. For example, in Japan, it is considered to be quite permissible to exemplate capital over its own twice. The best capital structure (in terms of minimizing costs for its maintenance) depends on both the profitability of equity and the credit rate sensitivity to an increase in the share of borrowed funds.

Horizontal analysis It implies the study of the absolute indicators of the company's economic activity for a certain period, the calculation of the pace of their change and evaluation.

For the purposes of this analysis, analytical tables are built, in which absolute reporting indicators are complemented relative, i.e. Changes the change in absolute indicators in the amount and in percent.

Under the conditions of inflation, the value of horizontal analysis is somewhat decreased, since the calculations produced with its help do not reflect the change in indicators associated with inflation processes, but the results of horizontal analysis are used in inter-farm comparisons.

Horizontal analysis is often used to add vertical analysis of economic indicators. Horizontal analysis - comparison of each reporting position with the previous period. It is next after vertical analysis. If, during vertical analysis, the structure of articles at the beginning and end of the period is set, then at the stage of horizontal analysis, it is determined by how changes have occurred by which sections and balance sheet items. Dynamic (horizontal) analysis is designed to identify the dynamics of changes in reporting indicators over time. Based on the semi-annual reporting, it is possible to trace the change in balance sheet articles per half, as well as the change in the income and expenses of the company for the past half of the year in relation to the same period last year. The main thing in carrying out this analysis is to establish the causes of the changes that occurred. It is possible to apply the following estimates (Table 2.4).

Table 2.4.

Evaluation of dynamic shifts in the balance sheet

An example of horizontal analysis is provided in Table. 2.5.

Table 2.5

An example of a horizontal analysis of accounting reporting

In the given example, the following positive changes can be noted in the dynamics of financial results. All types of profits in the reporting year compared with the previously increased (gross profit - by 12.5%, sales profit - by 16.4%, profit before tax - by 19.5%, net profit - by 65%).

Net profit grows faster than profit from sales and profits of the reporting period, which is explained by the rational tax policy of the organization.

The growth rate of the period costs is lower than the growth rate of revenue, which has a positive effect on the cost of a unit of products.

However, there are negative changes: sales profit is growing slower than revenue from implementation, which indicates a relative increase in production costs.

Need to assess the efficiency of the enterprise. It is used to determine profitability and stability in the field of market activity. The horizontal and vertical analysis of the balance sheet are the main methods of its conduct.

Acquaintance with the already finished balance allows you to determine:

• Sources, from where the company receives funds.
• Directions on which funds are investing.
• Indicators ratio sources of funds and directions of their investment.
• Other indicators to determine the stability and level of enterprise security.

The horizontal and vertical analysis techniques are used to determine the relative indicators that allow us to evaluate the dynamics of the overall development and activities of the enterprise, since indicators in absolute value are not always enough to carry out competent analytical activities.

The horizontal and vertical methodology of analytical activity is capable of mutually complement each other and submit to the analysis of the most complete picture of the dynamics of activity.

These types of analysis make it possible to compare the economic indicators of structures among themselves, completely different organizations and types of activities, which is very convenient for inter-farm comparisons.

To carry out both horizontal and vertical types of analysis of the balance sheet, it is necessary to have a balance itself. The main role in the analysis is played by his articles that are streamlined as the article attributes to a separate group and section.

The main role of any type of analysis is not a simple calculation of indicators and coefficients, but a feature of how they will be interpreted in relation to this organization. What conclusions will be made from their receipt and what measures are taken on their basis.

Based on the above types of analytical activities, it is possible to determine the main trends and directions in business, to conduct a correct assessment of the activities and profits that it brings.

Features of these analysis techniques

Horizontal analysis

The horizontal analysis of the accounting balance is carried out on the basis of absolute values \u200b\u200bby adding them with relative indicators in percentage form. Since it will be informative only in the case when several periods of activity are amenable to analyzing, per magnitude 100% take the initial period indicators, and the final indicators are displayed with respect to the first in percentage form.

This analysis provides viewing trends in indicators for several reporting periods, which allows you to make certain conclusions and take appropriate solutions to improve or stabilize the situation or with favorable conclusions to take measures to maintain positive trends.

The analysis helps to consider not only quantitative indicators of changes, but also the pace in which they occur on each of the accounting articles separately.

The results of the analysis are recorded in a table of a specific species. It can be in one instance or in several, depending on the value of the analyzed information, as well as the number of articles on which this analysis is carried out. In this form, absolute indicators have a percentage addition, which displays not only quantitative, but also temporary changes.

So, if you hold a horizontal analysis of activities for several years, and then for a certain period, it is possible to consider not only the trend of the changes that takes place, but also make forecasts for future activities of the company.

Interesting video about this form of analysis:

Vertical analysis

For an objective assessment of the general work of the enterprise use vertical analysis of the balance sheet. It helps to determine how each individual article influenced receiving a total result, its weight in obtaining the result, and also allows you to trace changes in the structure of a separate article.

Vertical analysis also implies the calculation of relative values \u200b\u200bbased on the absolute species. Often it happens in order to remove the impact on these indicators of factors of external origin, which do not have relation to the company's activities, but directly affect the indicators that it provides in its reporting.

When analyzing an accounting balance, an example of such a factor can be called inflation. It changes absolute indicators, while not affecting the process of activity of the enterprise. It is in this case that some generalization is necessary, which this effect will smooth for the most complete display of the economic situation within the enterprise.

Vertical analyzing makes it possible to view the dynamics of structural changes in accounting articles with time consideration, which allows not only to consider them, but also make predictions.

Detailed video about vertical analysis:

So, the horizontal and vertical analysis of the balance sheet is those methods of analysis that are important not just to consider changes in indicators, but also determining the trend regardless of the influence of external factors. Both techniques allow us to predict activities that is the main task of the analysis.

Analysis of the accounting balance allows you to get information about the company's status. To deliver the right "diagnosis" to business and give an objective assessment of management activities, it is necessary to rely on facts and analytics. The source of information in this case will be managerial and accounting reports. See how to spend vertical and horizontal balance analysis on the example of a particular enterprise.

What is this article:

Balance of the company

The asset is divided into another two sections:

1. Fixed assets, That property that is operated for more than one year transfers its cost on products for more than one production (operational) cycle.
2. Current assets, property of an organization that is consumed during the production (operational) cycle and transfer their value to the products (service) of the Organization.

Passive contains information about the sources of funding for the company's assets.

Sources are divided into three groups and partitions correspond to them:

1. Capital and reserves
2. long term duties
3. Short-term liabilities.

Analysis of the accounting balance on the example of an enterprise

As a through example, we take from open sources Accounting reports on the RAS of one of Russia's largest airlines (Table 1).

Table 1. Reporting for the analysis of the organization's balance (thousand rubles)

Even on the topic:

What will help: Assess the company's ability to repay their short-term obligations.

What will help: Determine the coefficients of absolute, current and intermediate liquidity, the indicators of the coating of working capital by their own sources of formation, recovery (loss) of solvency.

Horizontal balance analysis (analysis of the dynamics of indicators)

table 2. Horizontal analysis of balance

Horizontal analysis of assets

After the horizontal balance analysis, we see that from year to year intangible assets and R & D results are reduced, the company does not create new intangible assets, and those that have been practically written off.

An unusually looks like a jump (in 2015), and then fall (2016) the cost of fixed assets. This is due to the process of restructuring the businesses of the airline - in 2015, a significant number of aircraft were accepted into the balance of fixed assets, and in 2016 there was a significant disposal. The reason for the transfer of the helicopter park to another legal entity as a restructuring element.

From year to year, revenue investments are reduced in material values. Most likely due to the depreciation of the equipment, from which they mainly develop.

In 2015, and in 2016, long-term investments in financial assets increased, but the reasons for this growth from year to year were different, in 2015 long-term loans granted by the Company increased, and in 2016 financial investments increased by the appearance of new stock companies on the balance sheet It is possible a highlighted helicopter unit.

As a result of horizontal analysis, it became clear that in 2015 increased, and then in 2016 deferred tax assets declined, the reasons should be sought in the specifics of the mainstater accounting features.

In 2015 declined, and then in 2016 other non-current assets increased significantly - there is no information about the reasons, but financial analysts should pay attention and clarify the reasons for this speaker.

During 2015-2016, stocks grew mainly due to raw materials and materials, as we are talking about a large airline, it is possible to grow stocks was determined by the procurement of fuel.

The entire analyzed period decreased VAT on acquired values, perhaps this is due to a decrease in procurement.

In 2015, receivables fell, in 2016 it increased somewhat ( ). The deeper analysis of the balance sheet shows that in 2015 the reduction was achieved at the expense of short-term obligations of the debtors, and in 2016 he rose in the absolute and relative value of buyers' debt with maturity more than a year, which says not in favor of the company.

Short-term financial investments in 2015 remained relatively stable, and in 2016 declined sharply - the reason for the reduction in lending.

Cash and their equivalents have increased in 2015 and significantly decreased in 2016, perhaps the company used funds in accounts for debt restructuring purposes.

In general, assets and, accordingly, the size of the company's business has decreased since 2016 and relative to 2015 and 2014.

Read also:

What will help: Make a company budget transparent and accurate, plan to plan and control the costs of units.

Horizontal analysis of liabilities

In 2015, the company conducted additional issues of stocks for more than 3 billion rubles and sold new promotions for 25 billion, from here the corresponding changes in the balance sheet.

In addition, in 2015 disappeared from the balanced from shareholders in the amount of 21 million rubles. Shares, the value of the article has decreased - "Revaluation of non-current assets".

A positive factor is that in 2016 the importance of the article "uncovered loss" decreased and not at the expense of add. Emissions, and at the expense of profit.

Analyzing the IV and V sections of the balance, we see that short-term liabilities decreased greatly, and the long-term conversely increased - this is a consequence of restructuring - short-term sources were replaced by long-term, while partially short-term debt was covered from the means attracted due to additional emissions.

Analyzing the dynamics, very well understand the significance of a particular indicator in the balance structure, and here the second common method of balance analysis will help us.

The "second form" of accounting reporting is informative in itself. However, a comprehensive analysis of the report on financial results will increase informativeness at times. How to spend it and what conclusions to do, read in the article. And also download the Excel file, which it will calculate the indicators according to your data. Analysis of the report on financial results \u003e\u003e

Vertical balance analysis (structure analysis)

Continue the analysis of the balance to logically with the study of its structure, this method is called vertical balance analysis. We estimate the share that one or another category of assets / liabilities is in the balance sheet currency, we study the history of changing this share and draw conclusions.

Balance currency - the sum of all assets or liabilities.

Table 3.. Example of vertical analysis of the airline balance

The first thing we see as a result of vertical analysis of the structure of assets is the low share of fixed assets in assets. It would seem the basis of the activities of the airline is a large fleet of technology, but the modern business model of such companies is not focused on the operation of the technique and providing it with use, and in the provision of services - the movement of passengers and goods. To implement it, it is not necessary to be the owner of the technical means, it is necessary to have the opportunity to use as many of these funds as possible, and leasing helps in this airline. The equipment in leasing is reflected in off-balance accounts. The main facilities of the airline are primarily airport infrastructure, equipment and spare parts.

A significant share in the company's assets occupy financial investments by almost 36% (or 41% if you also take into account the short-term financial investments), but this is most likely a consequence of the company's development history, the availability of financial assets is not a necessary part of the company's business model.

The largest share in the company is occupied by receivables - almost 42% for 2016. Analyzing the company's assets should be focused on financial investments, as well as the structure and dynamics of receivables, the remaining elements of assets have a significantly less impact on the company's business.

To reduce receivables, check if you do not allow errors in its control. Download the instructions that will help control the debitor from the moment of signing the contract, Excel model for analyzing the debtors and checklist of the client's primary.

Teach the Sales Department staff to talk to the security service in the same language. For example, managers need to know what the mass director is, what signs are given one-day and what the executive production of the company of the counterparty is. Check your counterparties.

Service "Financial Director Counterparties" decides several key tasks at once:

• preventive work on avoiding hopeless debts,
• work with the reputation of the company,
• selection of counterparty on the necessary parameters,
• ready report of the FTS with an electronic signature.

All this in one service: take the demo available And check any of your counterparty.

Considering the sources of financing, it is necessary to assess the structure of sources - which is the main one: in our case, the company has accumulated a significant amount of uncovered losses, which is not covered by their own means. But if in 2014 most of the company's activities and, including loss were covered with short-term borrowed sources, in 2015 the company improved the financing structure and the overwhelming part of the balance currency was long-term sources, in addition, the company at the expense of emissions and profits in 2016 Reduced the accumulated minus on the III section of the balance sheet.

Vertical analysis means an expression of financial data relative to a particular element of financial statements. This means that all the elements of the reporting form for a certain period are divided into this element.

A simpler definition: This division of all numbers in the column on one of these numbers.

The elements that are most often used as a basic value to which other elements are divided are assets and revenues. In fact, the vertical analysis creates a coefficient between each position of the financial statements and the base element.

Vertical analysis allows you to determine the structure of the main elements of assets and liabilities Organizations, the influence of individual factors on the financial result, liquidity indicators.

Method of conducting a vertical reporting analysis

The calculation of the assets structure occurs through the division of a certain element of the asset to the total amount of assets. For example, the determination of the share of production reserves in the overall structure of assets is as follows:

Share of production reserves \u003d

cost of production reserves

amount of assets

As shown in Figure 1, the vertical analysis can be carried out with respect to the three main elements of the financial statements: the balance sheet, the report on financial results and the cash flow report.

Explanation of the results of vertical reporting analysis

With the substantiation of the conclusions on the identified structure of assets and liabilities, it is necessary to pay attention to the sphere of activity of the enterprise, the history of its functioning, the state of the market and the influence of its participants, the capital structure. In industrial enterprises, most assets under normal conditions make up intertwine assets, and the trading enterprise includes goods stocks.

The same applies to the sources of financing of the enterprise - a high proportion of equity testifies to low financial risks, but also on incomplete use by the enterprise of its potential. In the conditions of stable market functioning, such a capital structure may be optimal, but if it is possible to increase the presence on it - it is important to attract additional borrowed funds to intensify its activities.

Vertical analysis of balance

Balance when applying vertical analysis is calculated by dividing each element in balance The amount of total assets for the same period and expresses the result in the form of a percentage.

For example, Table 1 is a vertical balance analysis for a hypothetical company in the context of two equal periods of time. In this example, receivables increased from 35 percent to 57 percent of the total assets. What are the possible causes of such growth? The increase may mean that the company makes more credit-based sales, and does not receive money for the goods and services at the time of sale. Perhaps such actions are a response to the activity of competitors.

Alternatively, an increase in receivables in percentage of assets may occur due to changes in the amount of another element of assets, for example, due to reducing stock level; Analytics will need to find out why this assets category has changed.

Another possible reason for increasing receivables as a percentage of the value of assets is that the company reduced its credit standards, weakened its debt collection procedures or adopted a more aggressive revenue recognition policy. An analyst can refer to other comparisons and coefficients (for example, comparing growth rates of receivables with a sales growth rate to determine which explanation is most likely).

Table 1 - Vertical balance analysis for a hypothetical company

Vertical Analysis of the Financial Results Report

Vertical analysis of the financial results report implies dividing each reporting element on revenueand sometimes on the size of common assets (for example, in the case of studying the activities of financial institutions). If there are several sources of income, you should decompose income into several items and display the resulting number in percentage terms.

For example, Table 2 presents a vertical analysis of the report on the financial results of a hypothetical company in two different periods of time. Revenue is divided into four services of the company, each of which is shown as a percentage of total income. In this example, income from the service A has grown more significantly compared to other services of the company (up to 45 percent in the period 2).

What are the possible causes and the consequences of this change in the business structure? Was it a strategic decision of the company to focus on the sale of category services and due to their higher profitability? Apparently, no, because the company's profit before the deduction of interest and taxes (EBIT) decreased from 49 percent of sales of up to 41 percent, therefore other possible explanations should be considered. In addition, we note that the main reason for the reduction of profitability is that the cost increased from 15 percent to 25 percent of the total revenue. For the provision of services and is spent more than the company's resources? If the analyst wants to predict the future performance of the company, then it needs to understand the reasons for the current trend.

In addition, Table 2 shows that the company's income tax in interest will decrease significantly (from 15 to 8 percent). At the same time, the share of profits before tax (EBT) (as a rule, more relevant comparison) decreased from 36 percent to 23 percent. Does the company transfers its activities to jurisdiction with lower tax rates? If not, what explains this?

Table 2 - Vertical Analysis of the Financial Results of the Hypothetical Company

Vertical analysis of companies between sectors

As noted earlier, the coefficients and the results of the vertical analysis are comparable to some reference or regulatory values. Cross-analysis (sometimes called comparative analysis) compares a certain metric for one company with the same metric for another company or group of companies, which allows you to compare the data, even though companies may have different sizes and / or work in different conditions.

Table 3 is a vertical balance analysis for two hypothetical companies at the same time. Company 1 is clearly more liquid (liquidity is a display of how fast assets can be converted into cash) than company 2, which has only 12 percent of assets in the form of funds, compared with a highly liquid company 1, where funds are 38 percent Asset.

Given that cash, as a rule, relatively low-income assets and, therefore, are not the best way to use funds, the question arises, why does company 1 have such a large percentage of the total assets in cash? Perhaps the company is preparing for acquiring or maintaining a large monetary position as protection against a particularly changeable operating environment.

The second question, does the relatively high proportion of receivables in the company 2 indicate a large share of credit sales, general changes in the composition of assets, a reduction in the credit or collector standard or is the result of aggressive accounting policies?

Table 3 - Vertical balance analysis for two hypothetical companies

In general, the vertical analysis is an effective method for determining topical changes in the company's financial condition. It is worth using along with horizontal analysis, which will better understand the real state of affairs. Vertical analysis can be applied to all forms of financial statements of the enterprise.

List of used literature

Buzierev V.V., Nazhina I.P. Analysis and diagnosis of financial and economic activities of the construction enterprise / textbook. - M.: Knorus, 2016. - 332 p.

Kogdenko V.G., Economic Analysis / Tutorial. - 2nd ed., Pererab. and add. - M.: Uniti-Dana, 2011. - 399 p.

Thomas R. Robinson, International Financial Statement Analysis / Wiley, 2008, 188 pp.

Vertical analysis ( english Vertical Analysis.) financial statements, also known as a scale analysis ( english COMMON-SIZE ANALYSIS), implies the presentation of data not in absolute values, but as a percentage of the baseline. Such a transformation of financial statements simplifies comparison of financial information about the company for different reporting periods, and also allows you to compare it with similar financial information about other companies. In addition, the use of vertical analysis allows you to identify trends that are not always obvious when analyzing the financial statements in the traditional submission.

Methodology

As mentioned above, the methodology of vertical analysis involves the presentation of the financial statements in the form of relative values \u200b\u200bexpressed as a percentage.

Formula

To carry out calculations, you can use the universal formula:

According to it, the percentage of the basic value from the base value is calculated as the relationship of each individual position (lines in reporting) to the selected base value.

With a vertical analysis of the balance, the total amount in the "Assets" section and the amount under the section "Capital and Obligations" are selected as a basic value. Consequently, all individual positions under the "Assets" section are presented as a percentage of its final amount. Similar calculations are carried out in the section "Capital and Obligations".

With a vertical analysis of the income statement as a basic value, a revenue from sales is used as a basic value. All other positions of this report (for example, the cost of realized products, gross profits, operational costs, interest expenses, income tax, net profit) are expressed as a percentage of it.

As in the case of a profits and loss report, when analyzing the cash flow report, the amount of revenue from implementation is used as a base value. This makes it possible to obtain an idea of \u200b\u200bsuch positions as capital expenditures ( english Capex.), share issuance, reverse ransom of stocks, attraction and repayment of loans and loans, etc. The representation of these positions in relative terms makes it possible to estimate to what extent they affect the generation of revenue from sales.

This method allows you to analyze data for a separate reporting period, however, to improve the reliability of the results, it is recommended to carry out a comparative analysis with previous periods.

An example of a vertical analysis of financial statements

Comparative Vertical Analysis of Profit and Loss Report

Comparative vertical analysis of cash flow report

When conducting an analysis, the amount of revenue was used for 20x9 year 93,516 thousand cu, for 20x8 87 251 thousand cu

Benefits

The main advantage of vertical analysis is that it allows you to identify serious or sharp changes in the financial statements of the firm. Fast growth or reduction of individual indicators of financial statements will be easily traced in dynamics.

Also, this technique allows to obtain an idea of \u200b\u200bvarious strategies that implements the company. For example, one company may donate profitability, pursuing the goal to increase its market share. This, as a rule, will lead to an increase in revenue from sales, but will negatively affect gross, operating and net profit. However, such a company will demonstrate higher growth rates.