Horizontal analysis of financial statements is accomplished through:
A) placing statement items on an after-tax basis.
B) common-size statements.
C) computing both earnings per share and the price-earnings ratio.
D) trend percentages.

Question

Quizplus · Accepted Answer

Horizontal analysis, also known as trend analysis, involves analyzing financial statements over a period of time to identify changes and trends. Trend percentages are used to show the percentage change in each line item from one period to the next, allowing for easy comparison and analysis. Therefore, option D is the correct choice. Option A is incorrect as after-tax basis is used for calculating taxes not for horizontal analysis. Option B is incorrect as common-size statements are a different type of financial analysis. Option C is incorrect as earnings per share and price-earnings ratio are used for stock valuation not for financial statement analysis.

Horizontal Analysis of Financial Statements Is Accomplished Through