Horizontal analysis is
A)Looking at the changes in the account balances reported on a financial statement over time.
B)Looking at the changes in the account balances within a financial statement for one year.
C)Preparing an analysis of the profitability ratios in columns.
D)Looking at the changes in the account balances within a financial statement for three years.

Question

Quizplus · Accepted Answer

Horizontal analysis is the comparison of financial data over a period of time. Therefore, looking at the changes in the account balances reported on a financial statement over time is the best choice for describing horizontal analysis. Option B is incorrect because it only looks at changes within one year. Option C is incorrect because profitability ratios are not necessarily related to horizontal analysis. Option D is incorrect because there is no specific requirement for the number of years to be analyzed for horizontal analysis.

Horizontal Analysis Is