Which of the following is true of horizontal analysis?
A)The percentages of change can be added or subtracted from top to bottom.
B)The current year is always the base year.
C)The amounts of increase or decrease can be added or subtracted in the column from top to bottom and will give correct subtotals at each point.
D)The amounts and percentages of increase or decrease can be added and subtracted vertically in a column.

Question

Quizplus · Accepted Answer

Horizontal analysis involves analyzing financial statements over a period of time to identify changes and trends. In this type of analysis, the amounts or percentages of increase or decrease can be added or subtracted in the column from top to bottom to obtain subtotals at each point, making option C the correct answer. Option A is incorrect because the percentages of change cannot be combined using addition or subtraction. Option B is incorrect because any period can be taken as the base year. Option D is incorrect because it is not possible to add or subtract percentages and amounts vertically.

Which of the Following Is True of Horizontal Analysis