Selected data from the financial statements are provided below:
Rags to Riches

-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 2015 increased to 140.74% of the 2014 amount.
B)Gross profit is 57.9% of net sales for 2015.
C)Accounts receivable is 13.3% of total assets in 2015.
D)The accounts receivable turnover ratio is 7.76 in 2015.

Question

Selected data from the financial statements are provided below:
Rags to Riches 
 
-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 2015 increased to 140.74% of the 2014 amount. 
B)Gross profit is 57.9% of net sales for 2015. 
C)Accounts receivable is 13.3% of total assets in 2015. 
D)The accounts receivable turnover ratio is 7.76 in 2015.

Quizplus · Accepted Answer

Horizontal analysis compares financial data across multiple periods to determine the increase or decrease of each item. Therefore, the only choice that reflects an increase in a specific item in relation to the prior period is A, which states that net sales in 2015 increased to 140.74% of the 2014 amount. B refers to the relationship between gross profit and net sales, while C and D are both ratios that do not directly relate to changes in specific financial items over time.

Selected Data from the Financial Statements Are Provided Below