Pros and Cons of Horizontal and Vertical Analysis Essay

Pros and Cons of Horizontal and Vertical Analysis - Essay ExampleThe above table presents the horizontal epitome of Nike for the one-third sucks such as Q2, Q3 and Q4 ending November 2012, February 2013 and May 2013. In the horizontal analysis, each eviscerate item of income statement is divided by the total revenues figure in order to check the voice of that line item with respect to gross sales. If cost of sales of Nike is considered, it can be observed that it has remained quite unvarying in all the trine quarters and remained around 56% of sales (Nike Inc., 2013). Accordingly, the gross profit gross profit margin of the company is around 44%. Nike incurs substantial uptake over its demand creation activities such that this expenditure covers around 10% of sales every quarter. As far as operating overheads of the company be concerned, the company absorbs the expenditures at around 20% of sales level which remained consistent in previous three quarters. Similarly, sellin g and administrative expenses of the company are around 30% of the turnover of in each of the three quarters. Other incomes and interest incomes are nearly negligible such that they do not even urinate to 1% sales level. Income before taxes has been improved by 2% in third and tail quarter as compared to second quarter. Income tax expenditure of the company is also improving, i.e. showing a very routine decline on quarter-level percentages. Net income of the company has increased to double figures especially in third and fourth quarter. Overall, from the horizontal analysis of income statement of Nike, it is quite evident that the company has performed well and maintained consistent percentages of sales in the last three quarters. Vertical Analysis Balance Sheet May-13 Feb-13 Nov-12 ASSETS Current assets $ in one million million million % change $ in million % change $ in million Cash and equivalents 3,337 30.50% 2,557 11.61% 2,291 Short-term investments 2,628 76.97% 1,485 20.34% 1,234 Accounts receivable, net 3,117 -3.56% 3,232 1.38% 3,188 Inventories 3,434 3.15% 3,329 0.33% 3,318 Deferred income taxes 308 12.00% 275 -15.90% 327 prepaid expenses and other current assets 802 -9.07% 882 20.33% 733 Assets of discontinued operations 0 -100.00% 29 -91.57% 344 Total current assets 13,626 15.58% 11,789 3.10% 11,435 Property, plant and equipment 5,500 2.42% 5,370 1.13% 5,310 little accumulated depreciation -3,048 -1.99% -3,110 1.90% -3,052 Property, plant and equipment, net 2,452 8.50% 2,260 0.09% 2,258 Identifiable intangible assets, net 382 1.60% 376 0.53% 374 Goodwill 131 0.00% 131 0.00% 131 Deferred income taxes and other assets 993 -6.23% 1,059 8.84% 973 center ASSETS 17,584 12.61% 15,615 2.93% 15,171