Horizontal analysis of comparative financial statements includes the
A) development of common size statements.
B) calculation of liquidity ratios.
C) calculation of dollar amount and percentage changes from financial statements over a period of time, as compared to a base year.
D) evaluation of financial statement data that expresses each item in a financial statement as a percentage of a base amount.

Question

Quizplus · Accepted Answer

Horizontal analysis of comparative financial statements involves calculating dollar amount and percentage changes from financial statements over a period of time, as compared to a base year. This helps to understand how different items in the financial statements have changed over time and can reveal trends and areas of concern. Common size statements (A) express each item in a financial statement as a percentage of a base amount, while liquidity ratios (B) measure a company's ability to meet its short-term obligations.

Horizontal Analysis of Comparative Financial Statements Includes the