Horizontal analysis showed a 25% increase in accounts receivable in 2018 over 2017. Vertical analysis showed accounts receivable declining from 7.5% to 6.8% over the same period. Given this information, what conclusion(s) may be reached?
A) The dollar amount of accounts receivable increased.
B) The dollar amount of accounts receivable decreased.
C) It cannot be determined if the dollar amount of accounts receivable increased or decreased.
D) This result is impossible. An error has been made in the calculations.

Question

Quizplus · Accepted Answer

The horizontal analysis indicates a 25% increase in the dollar amount of accounts receivable, while the vertical analysis shows a decrease in the proportion of accounts receivable relative to total assets or sales, suggesting that while accounts receivable increased in dollar terms, other components increased at a faster rate.

Horizontal Analysis Showed a 25% Increase in Accounts Receivable in 2018