Question

Why is it that horizontal analysis is performed only on the income statement and balance sheet, but not on the statement of cash flows? A. When searching for fraud, examining the statement of cash flows is not as effective as comparing actual changes in account balances.B.Horizontal analysis converts balance sheet and income statement to change statements whereas the statementof cash flow is already a change statement.C. The statement cash flow of cash flows does not provide any valuable fraud-related information.D. Horizontal analysis of balance sheets and income statements is relatively easy, while applying the same procedure to the statement cash flows is complicated.

Answer 1

Horizontal analysis converts balance sheet and income statement to change statements whereas the statementof cash flow is already a change statement.

Explanation:

Horizontal analysis (also referred to as trend analysis) is a form of financial analysis that shows improvements over a period of time in the quantities of associated financial statement products. It is a helpful tool for assessing trends. The declarations are used in horizontal analysis for two or more periods.

The horizontal review of financial statements consists of the comparison over several tax years of a revenue ratio, a benchmark or a line item. Such research can be carried out, for example, on profits, operating expenses, investment, assets, capital, equities and liabilities.