What is horizontal analysis? It’s all about trends. And when it comes to strategy, in just about any context, the trend is far more important than the raw data.
Should an undefeated basketball team completely change strategy when they lose their first game after winning 10 in a row? Should a pop star start making country music when they have a single that doesn’t reach the top of the charts? And should a company throw out their entire strategy after one poor quarter?
The answer is of course, no. An individual event or period of underperformance isn’t just normal, it’s expected. But a downward trend in performances getting slowly worse over time? That’s something to be concerned about.
That’s where horizontal analysis comes in. It allows finance leaders to see the trajectory of their financials and adjust their strategic decision-making to keep the company on track.
Let's dive deeper into horizontal analysis, its practical applications, and technological solutions to help you improve it’s use in your business.