Question

In horizontal analysis the percent change is computed by: a. Subtracting the analysis period amount from the base period amount. b. Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. c. Adding the analysis period amount to the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. d. Adding the base period amount to the analysis period amount.

Answer 1

Answer:

  b. Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100%

Step-by-step explanation:

A percentage change can be computed from ...

  ((new amount) -(old amount))/(old amount) × 100%

This best matches the description of choice B.

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Comment on the answer

The formula offered in the question will show the "percent change" from 100 to 103 as 3. It is not 3; rather, it is 3%. The final multiplication must be by 100% in order to arrive at the proper number.