Selected data from the financial statements are provided below:

-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 2020 increased to 140.74% of the 2019 amount.
B)Gross profit is 57.9% of net sales for 2020.
C)Accounts receivable is 13.3% of total assets in 2020.
D)The accounts receivable turnover ratio is 7.76 in 2020.

Question

Selected data from the financial statements are provided below:
 
-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 2020 increased to 140.74% of the 2019 amount. 
B)Gross profit is 57.9% of net sales for 2020. 
C)Accounts receivable is 13.3% of total assets in 2020. 
D)The accounts receivable turnover ratio is 7.76 in 2020.

Quizplus · Accepted Answer

A horizontal analysis compares financial statement data over a period of time. Therefore, by conducting a horizontal analysis of the income statement, we can determine the percentage change in each item from one year to the next. The only answer choice that reflects a percentage change is A, which states that net sales increased to 140.74% of the 2019 amount. B, C, and D are all absolute values and cannot be interpreted as a percentage change.

Selected Data from the Financial Statements Are Provided Below