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    What are comparative financial statements?

    Comparative financial statements are the complete set of financial statements that an entity issues, revealing information for more than one accounting period. The financial statements that may be included in this package are:

    • The income statement (showing results for multiple periods)
    • The balance sheet (showing the financial position of the entity as of more than one balance sheet date)
    • The statement of cash flows (showing the cash flows for more than one period)

    Another variation on the comparative concept is to report information for each of the 12 preceding months on a rolling basis. Comparative financial statements are quite useful for the following reasons:

    • Provides a comparison of an entity's financial performance over multiple periods, so that you can determine trends (see horizontal analysis). The statements may also reveal unusual spikes in the reported information that can indicate the presence of accounting errors.
    • Provides a comparison of expenses to revenues and the proportions of various items on the balance sheet over multiple periods (see vertical analysis). This information can be useful for cost management purposes.
    • May be useful for predicting future performance, though you should rely more on operational indicators and leading indicators than on historical performance for this type of analysis.

    It is customary to issue comparative financial statements with additional columns containing the variance between periods, as well as the percentage change between periods.

    The Securities and Exchange Commission requires that a publicly held company use comparative financial statements when reporting to the public on the Form 10-K and Form 10-Q.

    Comparative Financial Statements Example

    The following is an example of a balance sheet that is presented on a comparative basis.

    ABC International
    Balance Sheet

      as of
    as of
    as of
    Current assets      
    Cash $1,200 $900 $750
    Accounts receivable 4,800 3,600 3,000
    Inventory 3,600 2,700 2,300
    Total current assets $9,600 $7,200 $6,050
    Total fixed assets 6,200 5,500 5,000
    Total Assets $15,800 $12,700 $11,050
    Current liabilities      
    Accounts payable $2,400 $1,800 $1,500
    Accrued expenses 480 360 300
    Short-term debt 800 600 400
    Total current liabilities $3,680 $2,760 $2,200
    Long-term debt 9,020 7,740 7,350
    Total liabilities 12,700 10,500 9,550
    Shareholders’ equity 3,100 2,200 1,500
    Total liabilities and equity $15,800 $12,700 $11,050

    Related Topics

    Common size balance sheet 
    Comparative balance sheet
    How to prepare a cash flow statement
    What are pro forma financial statements?
    What is a comparative income statement? 

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