Which of the following statements is true regarding horizontal analysis?
A) It can only be used with balance sheet accounts.
B) It can only be used with income statement accounts.
C) It expresses each financial statement line item as a percent of the largest amount on the statement.
D) It expresses each financial statement line item as a percent of the earliest year amount.

Question

Quizplus · Accepted Answer

Horizontal analysis, also known as trend analysis, compares financial statement line items over multiple periods. The percentage change from the earliest period to the current period is calculated and expressed as a percentage of the earliest period amount. Therefore, choice (D) is the correct answer.

Which of the Following Statements Is True Regarding Horizontal Analysis