The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2007.

-What would horizontal analysis report with respect to net income before income tax expense and net income?
A) Horizontal analysis would report both net income before income tax expense and net income as 45.45% of net sales revenue.
B) Horizontal analysis would report a $25,000 increase in both net income before income tax expense and net income.
C) Horizontal analysis would report a 45.45% increase in both net income before income tax expense and net income.
D) None of the above is correct.

Question

The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2007.
 
-What would horizontal analysis report with respect to net income before income tax expense and net income?
A) Horizontal analysis would report both net income before income tax expense and net income as 45.45% of net sales revenue. 
B) Horizontal analysis would report a $25,000 increase in both net income before income tax expense and net income. 
C) Horizontal analysis would report a 45.45% increase in both net income before income tax expense and net income. 
D) None of the above is correct.

Quizplus · Accepted Answer

Horizontal analysis involves comparing financial data over time to identify trends or changes. A 45.45% increase indicates the percentage change in net income before income tax expense and net income over the period analyzed.

The Following Is a Summary of Information Presented on the Financial