The horizontal analysis variance of "Sales Revenue" for 2022 is 20%. This indicates a 20% increase in sales revenue compared to the base year (2021). It implies that the company experienced a positive growth or improvement in its sales performance.
To calculate the horizontal analysis variance of "Sales Revenue" for the year 2022, we need the financial statements for both the base year (year of comparison) and the current year.
Let's assume the following information:
Base year (2021):
Sales Revenue: $1,000,000
Current year (2022):
Sales Revenue: $1,200,000
To calculate the horizontal analysis variance, we can use the following formula:
Variance = (Current Year Amount - Base Year Amount) / Base Year Amount * 100
Applying this formula to our example:
Variance = ($1,200,000 - $1,000,000) / $1,000,000 * 100
Variance = $200,000 / $1,000,000 * 100
Variance = 20%
Horizontal analysis is a financial analysis technique used to compare financial statement data over multiple periods. It helps identify trends, patterns, and changes in financial performance over time. The variance calculated provides valuable insights into the growth or decline of specific financial metrics, allowing stakeholders to assess the company's overall financial health and performance.
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