Comparing the amount of a balance sheet item in one year to the amount for the same item in a prior year is called
A) common-size analysis.
B) vertical analysis.
C) horizontal analysis.
D) trend analysis.

Question

Quizplus · Accepted Answer

Comparing the amount of a balance sheet item in one year to the amount for the same item in a prior year is called horizontal analysis. Common-size analysis involves expressing each item on the financial statement as a percentage of a common base such as sales, while vertical analysis involves expressing each item on the financial statement as a percentage of a common total such as total assets or total liabilities and equity. Trend analysis involves looking at changes over multiple periods to identify patterns or trends.

Comparing the Amount of a Balance Sheet Item in One