A horizontal analysis of balance sheet data involves a comparison of a balance sheet amount on a given date with
A) the total of the assets on the balance sheet for that date.
B) the net sales from the income statement for the period ending on that date.
C) the total stockholders' equity on the balance sheet for that date.
D) the amount for the same balance sheet item on a previous date.

Question

Quizplus · Accepted Answer

A horizontal analysis of balance sheet data involves comparing the amount of a balance sheet item on a given date with the amount of the same item on a previous date. This analysis helps to identify changes in the financial position of a company over time. Option A is incorrect because it refers to a vertical analysis, which involves expressing each item on the balance sheet as a percentage of a base amount. Option B is incorrect because it refers to comparing balance sheet data with income statement data. Option C is incorrect because it refers to comparing one section of the balance sheet with another section of the same balance sheet.

A Horizontal Analysis of Balance Sheet Data Involves a Comparison