If the comparative balance sheet shows the amount and percentage of decrease in merchandise inventory from 2019 to 2020, the firm used:
A)horizontal analysis.
B)vertical analysis.
C)common-size analysis.
D)trend analysis.

Question

Quizplus · Accepted Answer

Horizontal analysis involves the comparison of financial statement items over time to identify changes in their absolute and proportional amounts. By comparing the merchandise inventory balance of 2019 with that of 2020 and calculating the decrease in both the amount and percentage terms, the firm used horizontal analysis. This method helps to identify trends and significant changes in financial performance over time.

If the Comparative Balance Sheet Shows the Amount and Percentage