The Ranger Corporation data for the current year and prior year is as follows: What would a horizontal analysis report with respect to net income show?
A)Both net income before tax expense and net income are 8.99% of net sales revenue.
B)There was an increase in net income of 52.86%.
C)Both net income before income tax expense and net income increased by $18,500.
D)The current ratio is 4.26.

Question

The Ranger Corporation data for the current year and prior year is as follows:  What would a horizontal analysis report with respect to net income show?
A)Both net income before tax expense and net income are 8.99% of net sales revenue. 
B)There was an increase in net income of 52.86%. 
C)Both net income before income tax expense and net income increased by $18,500. 
D)The current ratio is 4.26.

Quizplus · Accepted Answer

A horizontal analysis compares financial data from different periods to determine the percentage increase or decrease. Since no specific numbers are given in the question, we cannot calculate the exact percentage increase or decrease. However, the answer options provide some clues.

Option A says that both net income before tax expense and net income are 8.99% of net sales revenue, which is not related to a horizontal analysis of net income.

Option B states that there was an increase in net income of 52.86%, which is the most relevant to a horizontal analysis report. This means that net income in the current year is 52.86% higher than the net income in the prior year.

Option C says that both net income before income tax expense and net income increased by $18,500. This is not a relevant answer as it only provides a numerical value without any percentage increase or decrease.

Option D states the current ratio which is not related to a horizontal analysis of net income.

The Ranger Corporation Data for the Current Year and Prior