The Bristol Corporation data for the current year and prior year is as follows: With respect to current assets, what would a horizontal analysis report?
A)Inventory turnover of 1.29 times
B)Current ratio of 3.56
C)Current assets as 100.00% of total assets
D)A 38.89% increase in current assets

Question

The Bristol Corporation data for the current year and prior year is as follows:  With respect to current assets, what would a horizontal analysis report?
A)Inventory turnover of 1.29 times 
B)Current ratio of 3.56 
C)Current assets as 100.00% of total assets 
D)A 38.89% increase in current assets

Quizplus · Accepted Answer

A horizontal analysis compares financial data from one period to another period. In this case, the data provided is for the current year and the prior year. To analyze current assets, we would compare the current year's current assets to the prior year's current assets. The calculation would be:

(Current Year's Current Assets - Prior Year's Current Assets) / Prior Year's Current Assets

Using the data provided in the link, the calculation would be:

($789,000 - $567,000) / $567,000 = 0.391 or 39.1%

This means that current assets increased by 39.1% from the prior year to the current year. Therefore, the best choice is D.

The Bristol Corporation Data for the Current Year and Prior