A comparative analysis is a method of analyzing the changes that have taken place in recent two years financial statements. This is also called horizontal analysis as it compares two or more years’ financial statements in terms of percentage or dollar values.
Sarbanes Oxley Act requires the companies to prepare and present the financial statements on a comparative basis. The company can assess the performance in terms of increase or decrease in any item of assets, liability or equity over years.
Consider the following example:
|
COMPARATIVE BALANCE SHEET FOR THE YEAR 2019 and 2020 |
||||
|
2019 |
2020 |
Change ($) |
Change (%) |
|
|
Cash |
35,000 |
37,500 |
2,500 |
7% |
|
Accounts Receivables |
40,000 |
42,000 |
2,000 |
5% |
|
Inventories |
68,000 |
62,000 |
(6,000) |
-9% |
|
Other current assets |
19,000 |
21,000 |
2,000 |
11% |
|
Property Plant Equipment (Net) |
750,000 |
690,000 |
(60,000) |
-8% |
|
Total Assets |
912,000 |
852,500 |
(59,500) |
-7% |
|
Accounts payable |
85,000 |
75,000 |
(10,000) |
-12% |
|
Short term loan |
33,000 |
27,000 |
(6,000) |
-18% |
|
Long term liabilities |
500,000 |
450,000 |
(50,000) |
-10% |
|
Share Capital |
95,000 |
95,000 |
- |
0% |
|
Retained Earnings |
199,000 |
205,500 |
6,500 |
3% |
|
Total Liabilities and Equity |
912,000 |
852,500 |
(59,500) |
-7% |
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