Which of the following is true concerning horizontal analysis?
A)It is also called common size analysis.
B)It consists of analyzing changes in financial statement amounts across time.
C)It consists of analyzing financial statements in terms of a base amount.
D)It restates each income statement line item as a percentage of net sales.

Question

Quizplus · Accepted Answer

Horizontal analysis compares financial statement amounts across time, typically using percentage change calculations. Common size analysis (choice A) expresses each financial statement line item as a percentage of a base amount. A vertical analysis (choice C) similarly expresses each line item as a percentage of a common base, but does so within a single period instead of comparing across time. Restating each income statement line item as a percentage of net sales (choice D) is an example of common size analysis, not horizontal analysis.

Which of the Following Is True Concerning Horizontal Analysis