Which of the following statements regarding horizontal analysis is not true?
A)Percentage analysis involves computing the percentage relationship between two amounts.
B)A horizontal analysis of cost of goods sold on the income statement includes dividing net income by total revenue.
C)Horizontal analysis attempts to eliminate the materiality problem of comparing firms of different sizes.
D)In horizontal percentage analysis,a financial statement line item is expressed as a percentage of the previous balance of the same item.

Question

Quizplus · Accepted Answer

Horizontal analysis compares items over many time periods;vertical analysis compares many items within the same time period.As such,vertical analysis of cost of goods sold on the income statement includes dividing net income by total revenue.

Which of the Following Statements Regarding Horizontal Analysis Is Not