What is Horizontal Financial Analysis?
Horizontal analysis is a financial statement analysis technique that compares each line item across two or more periods, expressed in absolute and percentage change terms. It highlights trends, growth, and decline patterns in revenues, costs, and balance sheet items over time.
How It Works
- Select a base year and at least one comparison year.
- Calculate the absolute change (current – base) for each line item.
- Calculate the percentage change ((current – base) / base × 100).
- Identify items with significant changes and investigate the underlying drivers.
Saudi Context
Saudi listed companies present at least two years of comparative figures in their annual reports. Analysts and lenders regularly use horizontal analysis to assess growth momentum, especially in Vision 2030 priority sectors such as tourism, mining, and renewable energy.
Example
A Saudi industrial company reports SAR 200 million revenue in 2024 versus SAR 150 million in 2023. Horizontal analysis shows SAR 50 million growth, a 33% year-over-year increase, which the company links to new export contracts.