Analyzing Kingbird, Inc.'s Financial Performance: Horizontal Analysis for 2022
How can we prepare a horizontal analysis for Kingbird, Inc. for 2022 using 2021 as the base year?
To prepare a horizontal analysis for Kingbird, Inc. for 2022 using 2021 as the base year, you need to compare the financial figures between the two years and calculate the percentage change. Gather the financial information for both 2021 and 2022, identify key financial figures like revenue, expenses, or net income, calculate the dollar change by subtracting the 2021 amount from the 2022 amount, calculate the percentage change by dividing the dollar change by the 2021 amount and multiplying by 100, and round the percentage change to 1 decimal place. Repeat this process for each financial figure you want to analyze and present the results in a schedule with the dollar and percentage changes for each item.
Understanding Horizontal Analysis for Financial Performance
To perform a horizontal analysis for Kingbird, Inc. in 2022 using 2021 as the base year, you need to compare the financial figures between the two years and calculate the percentage change. This analysis technique helps in evaluating the company's financial performance trends over time, providing insights into growth or decline.
Steps to Prepare Horizontal Analysis:
1. Gather Financial Information: Collect data for both 2021 and 2022, including revenue, expenses, net income.
2. Identify Key Financial Figures: Choose the financial metrics you want to analyze for comparison.
3. Calculate Dollar Change: Subtract the 2021 figure from the 2022 figure to determine the difference in dollars.
4. Calculate Percentage Change: Divide the dollar change by the 2021 amount, then multiply by 100 to get the percentage change.
5. Round Percentage Change: Round the percentage change to 1 decimal place for clarity and consistency.
Importance of Horizontal Analysis:
Performing horizontal analysis allows you to:
- Track financial performance over time
- Identify areas of growth or decline
- Evaluate the effectiveness of financial decisions
- Make informed business decisions based on trends
By conducting a horizontal analysis for Kingbird, Inc., you can gain valuable insights into the company's financial health and make strategic plans for future growth and profitability.