Kentwood corporation reports net sales of $880,000 in year 1 and $720,000 in year 2, then by the use of Horizontal analysis, the percentage increase or decrease in sales is 22.22%.
Horizontal analysis is a technique that is used in examining a company's financial records throughout time.
It is frequently shown as a percentage increase over the same line item the previous year. Financial statement consumers can easily discover trends and growth patterns using horizontal analysis.
Computation of percentage increase or decrease in sales:
Percentage decrease in sales = decrease in sales / year 1 sales × 100
Decrease in sales = 160,000 ($880,000-$720,000)
= 160,000/720,000×100
= 22.22 %
Therefore, the percentage increase or decrease in sales is 22.22%.
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