Analysis of the articles in the balance sheet is carried out in order to characterize the property structure of the company and the sources of its financing. Methods of assessment of the reporting document can be chosen different.
So, for example, vertical analysis reflects the structure of the company's funds, their sources. Vertical analysis allows for relative estimates. These estimates, in turn, make it possible to compare the economic performance of companies that differ in the amount of resources used, to smooth out the impact of inflationary processes that distort the absolute values in the financial statements.
Vertical analysis is carried out in accordance with the scheme. First of all, they determine the shares of current and fixed assets as a result of reporting, then consider their structure, identify the share of invested funds and current liabilities and their structure. After determine the causes of changes in reporting.
Horizontal analysis is a reporting evaluation method that involves the construction of several (or one) analytical tables. In these constructions, the absolute values are supplemented by the relative rates of decline (growth).
Horizontal analysis is more conveniently carried out using an analytical table that contains values such as the indicator of liability (asset) at the end and beginning of the year in money and percentages to total, changes in the size of liabilities (assets) in money, percent, and specific gravities. When the presented dynamics in the documents covers a time period of more than a year, the calculation of the base rate is carried out for several adjacent periods (years). Thus, horizontal analysis allows us to evaluate not only changes in individual indicators, but also to predict their value.
Vertical assessment makes it possible to pay attention to the elements that have the highest specific gravity. Horizontal analysis allows you to focus on those components, the proportion of which changes spasmodically. Both those and other components are to some extent indicators of problem areas of the enterprise. Using horizontal analysis alone is often impractical. To reflect the full picture, both methods in combination are more often used.
Thus, the horizontal and vertical analysis of the balance sheet are closely interconnected.
It should be noted that both approaches are of particular value when conducting inter-farm comparisons, comparing the reporting of different enterprises by production volumes and activities.
There is also a coefficient method of economic valuation. It is a set of relative values, which are determined according to the financial statements, mainly on data on losses and profits. Odds are used in accordance with the theory, which provides for a certain ratio between specific articles in the report. Preferred values will depend on the industry characteristics of production, their sizes, which, as a rule, are estimated by sales volume per year or average annual price of assets. These indicators can be affected by the state of the economy as a whole and the phase of the business cycle. The calculation of the coefficients is carried out according to the reports, which are translated into an analytical form.
As a complement to this approach, a factorial method is used. This method allows you to establish changes in the resulting trait that occurred under the influence of certain factors that have, presumably, a quantitative effect. Using deterministic models , a study is carried out of the functional relationship between arguments (factors) and function (effective indicator).