Select the incorrect statement regarding horizontal analysis.
A) Percentage analysis involves establishing the relationship of one amount to another.
B) A horizontal analysis of cost of goods sold on the income statement includes dividing net income by total revenue.
C) Percentage analysis attempts to eliminate the materiality problem of comparing firms of different sizes.
D) In doing horizontal analysis, an account is expressed as a percentage of the previous balance of the same account.

Question

Quizplus · Accepted Answer

Horizontal analysis of cost of goods sold on the income statement does not involve dividing net income by total revenue. Instead, it involves comparing the cost of goods sold from one period to another to identify any increase or decrease in the cost of goods sold.

Select the Incorrect Statement Regarding Horizontal Analysis