Three commonly used tools for financial statement analysis are as under• Horizontal Analysis: evaluates a series of financial statement data over a period of time. It is
used primarily in intra-company comparisons. Two features in published financial statements
facilitate this type of comparison. First, each of the basic financial statements presents
comparative financial data for a minimum of two years. Second, a summary of selected financial
data is presented for a series of 05 to 10 years or more. Example
• Vertical Analysis: evaluates financial statement data by expressing each item in a financial
statement as a percentage of a base amount. It is used in both intra- and intercompany
comparisons. Example
• Ratio Analysis: expresses the relationship among selected items of financial statement data.
This technique is used in all three types of comparisons- intra-company, inter-company, and
industry-wide average.