Horizontal analysis

Horizontal analysis compares a financial statement line item across two or more periods, expressing the change as a percentage of the earlier period's figure to reveal growth or decline over time.

ByHoang TruongUpdated July 5, 2026

See it move

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A side-by-side comparison applies horizontal analysis to two income-statement lines. Revenue rose from €4,000,000 in Year 1 to €4,600,000 in Year 2, a 15% increase. Cost of goods sold rose from €2,400,000 to €2,900,000 over the same period, a 20.8% increase measured against the Year 1 base. Costs grew faster than revenue, squeezing the gross margin even as profit still looks acceptable in euro terms.

Where it fits

SubjectFinancial AccountingCoreTopicFinancial Statement Analysis & RatiosCore

The formula

LaTeX

\%\Delta = \dfrac{\text{Current period value} - \text{Base period value}}{\text{Base period value}} \times 100

Variables

$V 1$: Current period value (€)
$V 0$: Base period value (€)

Shows the growth or decline of one line item from a base period to a later period, expressed as a percentage.

Check yourself

PracticeCORE

A company reports operating expenses of €850,000 in Year 1 and €935,000 in Year 2. Using horizontal analysis with Year 1 as the base period, what is the percentage change in operating expenses?

Select an answer to check your understanding.