Computing a percentage change in horizontal analysis requires two steps. The first step is compute the dollar amount of the change from the base period to the next period and the second step is to:
A)divide the dollar amount of the change by the current period amount.
B)multiply the dollar amount of the change by the current period amount.
C)divide the dollar amount of the change by the base-period amount.
D)multiply the dollar amount of the change by the base-period amount.

Question

Quizplus · Accepted Answer

To compute the percentage change, the dollar amount of the change needs to be divided by the base-period amount, which will give the percentage change from the base period to the next period. Option A and B are incorrect as they multiply or divide the dollar amount by the current period amount instead of the base-period amount. Option D is also incorrect as it multiplies the dollar amount of change by the base-period amount rather than dividing it.

Computing a Percentage Change in Horizontal Analysis Requires Two Steps