Question

Horizontal analysis of comparative financial statements includes a. calculation of liquidity ratios. b. development of common-size statements. c. evaluation of each component in a financial statement to a total within the statement. d. calculation of dollar amount changes and percentage changes from the previous to the current year.

Answer 1

Answer:

D is the correct option.

Explanation:

Horizontal analysis is the analysis of the comparison of the historical financial information over a series of reporting periods. It is mostly used to know if any numbers are usually high or low in comparison to the information of bracketing periods, if the numbers are unusually high or low it can lead to detailed investigation to find out the reason. It is also used to project the number of various line items for the future. The analysis includes a simple grouping of information which is sorted by period. The numbers of succeeding periods can also be expressed in percentages.