DEFINITION of 'Horizontal Line'

In finance and economics, a horizontal line is usually the X axis in a data plot. It is a line that appears to proceed from left to right, or parallel to the x-axis in coordinate geometry.

BREAKING DOWN 'Horizontal Line'

In geometric analysis, a horizontal line appears to proceed along the x-axis.  Put another way, on a perfectly horizontal line, all values on the line will have the same y-value.

Technical Analysis

Technical analysts use charts to determine the price direction of a stock or market. Charts are simply graphical representations of a series of prices over time, with the y-axis (vertical line) represents the price scale and the x-axis (horizontal line) represents the time scale.

Horizontal Analysis

Horizontal analysis is used to compare values or prices over time.  This is simply an aspect of fundamental analysis in which an analyst will compare various earnings reports and statements over time. In this kind of analysis, time functions as the horizontal x-axis, and allows analysts to calculate percentage changes over time, a useful tool for representing the degree of change.

Horizontal analysis looks at the trend of financial statements over multiple periods, using a specified base period, and typically shows the changes from the base period in dollar and percentage. The percentage change is calculated by first dividing the dollar change between the comparison year and the base year by the item value in the base year, then multiplying the quotient by 100%. For example, when you hear someone saying that revenues increased by 10% this past quarter, that person is using horizontal analysis. Horizontal analysis can be used on any item in a company's financials from revenues to earnings per share (EPS) and is useful when comparing the performance of various companies.

Supply and Demand Curves

Supply and demand curves are drawn with price on the vertical axis of the graph and quantity demanded on the horizontal axis. When looking at supply and demand curves, a perfectly horizontal line indicates that an item has perfect elasticity, or that its demand is immediately responsive to changes in price. When the price of a perfectly elastic good or service increases above the market price, the quantity demanded falls to zero. With perfect elasticity, consumers simply are not willing to spend more than a specific price for a good or service.

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