Which of the following best describes horizontal analysis? comparing financial statement amounts from year to year for the same company expressing each financial statement amount as a percentage of a budgeted amount comparing a company's financial statements with other companies calculating key ratios to evaluate performance

Question

Business

Mercedes Ferguson

8 October, 17:38

Which of the following best describes horizontal analysis? comparing financial statement amounts from year to year for the same company expressing each financial statement amount as a percentage of a budgeted amount comparing a company's financial statements with other companies calculating key ratios to evaluate performance

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Answers (1)

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Natasha Blackburn · Answer 1

Comparing financial statement amounts from year to year for the same company

Explanation:

When you carry out a horizontal analysis of the financial statements of a corporation you compare how the different accounts have changed over a period of time.

For example, you can perform a horizontal analysis to determine how total costs affect net profits in the income statement. You take the 2017, 2018 and 2019 income statements and compare how total costs have evolved during that period or time, and what percentage do they represent of total revenue.