Analyzing The Functions Of A Business, Many Relies On...

Business quality is of upmost concern when investing or owning a business. To analyze the functions of a business, many rely on financial statement analysis. The analysis explains the findings of the financial statement. Financial statement analysis recognizes a company’s weaknesses in order to take corrective actions (Ã… ½ager, 2012). Financial analysis uses three different methods, vertical analysis, horizontal analysis, and ratio analysis. A vertical analysis of income is a vertical column of data expressing each expense category as a percentage of sales (Lita Epstein, 2014). An expense percentage is figured by dividing the expense amount by the profit amount and multiplies by one hundred. The total of the expense percentage will be one hundred percent. For example, County Hospital’s vertical analysis shows operating expenses use forty seven percent, taxes paid use sixteen percent; cost of goods sold use twenty four percent, and net income was twenty percent of th eir income. Vertical analysis only shows percentage and less detail than other methods of financial evaluation. An alternative method of financial evaluation is horizontal analysis. Epstein’ textbook defines horizontal analysis as a compartment of data from two different periods to look for trends in a company s income (Lita Epstein, 2014). In a horizontal analysis of a Nursing Home financial statement, classifications show an increase or decrease percentage over the previous year. For example, Wayne DayShow MoreRelatedCorporate Governance : Walmart Inc.1544 Words   |  7 Pagesretail and consumables, but because it is also at the top when it comes to non-consumables and having one of the best corporate governance there is in today’s business. The corporate governance is a superior tool for any business to place into effect, thus allowing its board of directors the ability to use the necessary avenues to make the business a success. 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