Financial statements can be confusing to read, especially if you’re not familiar with the terms and concepts used. Two of the most common terms in financial analysis are year-over-year (yoy) and quarter-over-quarter (qoq). Understanding these two measurements is essential for making informed decisions about your business. So what do these numbers mean? Let’s break it down.
What is Year-Over-Year Analysis?
Year-over-year (yoy) analysis looks at changes in a company’s financial performance from one year to the next. It compares financial metrics from one fiscal year to the metrics from the previous fiscal year. In other words, yoy analysis measures changes over time by comparing data from different points in time—in this case, different years. This type of comparison helps identify trends that may have gone unnoticed or undervalued had they been analyzed in isolation. For example, if a company sees a 10% increase in profits yoy, this could indicate that its strategies have been successful or that market conditions have improved.
What is Quarter-Over-Quarter Analysis?
Quarterly reports provide investors with a snapshot of how companies are performing on a more frequent basis than annual reports do. Quarter over quarter (qoq) analysis measures changes between two quarters—say, Q3 2019 compared to Q2 2019—rather than looking at longer periods of time like yoy analysis does. In other words, qoq measures changes over shorter periods of time by comparing data collected during those same periods of time. Qoq analysis can be used to identify short term trends such as seasonal effects on sales or unexpected spikes in revenue due to new products or services being launched in a particular quarter.
Yoy and qoq analyses provide important insights into how businesses are performing over different lengths of time. Yoy gives an overview of overall performance while qoq provides details about short term performance patterns that may influence future decisions regarding investments and strategies for growth. Understanding both types of analyses will help you make informed decisions about your business and ensure that you are always taking steps towards success!