Horizontal analysis of comparative financial statements includes the
A) calculation of the percentage of net sales for each item listed.
B) calculation of dollar amount changes and percentage changes from the previous to the current year.
C) development of common-size statements.
D) calculation of liquidity ratios.

Question

Quizplus · Accepted Answer

Horizontal analysis involves comparing financial statements from two or more periods to identify trends in the company's financial performance. This is typically done by calculating the dollar amount changes and percentage changes from the previous to the current year, which is why option B is the correct answer. Option A refers to vertical analysis or common-size statements, while Option C is the specific technique used to do vertical analysis. Option D is unrelated to horizontal analysis as it involves measuring a company's ability to meet short-term debt obligations.

Horizontal Analysis of Comparative Financial Statements Includes the