What of the following would be shown on B.Darin's horizontal analysis when calculating percentage changes from 2010 to 2011?
A) An increase in sales revenue of 23%.
B) An increase in gross profit of 41.5%.
C) An increase in interest expense of 100%.
D) An increase in net income of 57%.

Question

Quizplus · Accepted Answer

Horizontal analysis compares changes in financial statement items over time. It calculates the percentage change between two time periods. In this case, we are comparing 2010 and 2011. The increase in sales revenue (choice A) is not enough information to determine if it is a significant change or not. The increase in interest expenses (choice C) is not a positive change and indicates that the company may have taken on more debt or has higher borrowing costs. The increase in net income (choice D) by 57% is not enough information to determine if it is a significant change or not.

However, the increase in gross profit (choice B) by 41.5% is a significant change and indicates that the company was able to increase its profitability over the course of one year. Therefore, choice B is the best option.

What of the Following Would Be Shown on B