Tools and Techniques of Financial Statement Analysis: Following are the most important tools and techniques of financial statement analysis: Horizontal and Vertical Analysis Ratios Analysis 1. Horizontal and Vertical Analysis : Horizontal Analysis or Trend Analysis : Comparison of two or more year's financial data is known as horizontal analysis , or trend analysis. Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form. Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form as has been done in the example below. Showing changes in dollar form helps the analyst focus on key factors t hat have affected profitability or financial position. Observe in the example that sales for 2002 were up $4 million over 2001, but that this increase in sales was more than negated by a $4.5million increase in cost of goods sold. Showing changes between years in perce...