Rags to Riches Selected data from the financial statements are provided below:
$\begin{array}{ll}
& \underline{ 2015 } & \underline{ 2014 } \
\text { Accounts Receivable } &\$ 120,000 & \$ 76,000 \
\text { Inventory } &24,000 & 32,000 \
\text {Total Assets } &900,000 & 760,000 \
\text { Net Sales } &760,000 & 540,000 \
\text { Cost of Goods Sold } &320,000 & 420,000
\end{array}$
-Refer to Rags to Riches.Which of the following would result from a horizontal analysis of the company's income statement?
A)Net sales in 2015 increased to 140.74% of the 2014 amount.
B)Gross profit is 57.9% of net sales for 2015.
C)Accounts receivable is 13.3% of total assets in 2015.
D)The accounts receivable turnover ratio is 7.76 in 2015.

Question

Rags to Riches Selected data from the financial statements are provided below:
$\begin{array}{ll}
& \underline{ 2015 } &  \underline{ 2014 } \
 \text { Accounts Receivable } &\$ 120,000 & \$ 76,000 \
 \text { Inventory } &24,000 & 32,000 \
 \text {Total Assets  } &900,000 & 760,000 \
 \text { Net Sales } &760,000 & 540,000 \
 \text { Cost of Goods Sold } &320,000 & 420,000
\end{array}$ 
-Refer to Rags to Riches.Which of the following would result from a horizontal analysis of the company's income statement?
A)Net sales in 2015 increased to 140.74% of the 2014 amount.
B)Gross profit is 57.9% of net sales for 2015.
C)Accounts receivable is 13.3% of total assets in 2015.
D)The accounts receivable turnover ratio is 7.76 in 2015.

Quizplus · Accepted Answer

Horizontal analysis is a technique used to compare financial statement data from period to period, expressed as a percentage change. A horizontal analysis of the income statement would show the percentage change in net sales, cost of goods sold, and gross profit from 2014 to 2015. Option A is the only choice that is a result of a horizontal analysis of the income statement, showing that net sales in 2015 increased to 140.74% of the 2014 amount. Options B, C, and D are not related to a horizontal analysis of the income statement.

Rags to Riches Selected Data from the Financial Statements Are