In conducting horizontal analysis,it is important to focus attention on the changes in
A) the rate of inflation.
B) the composition of the statements.
C) dollar amounts and their percentages.
D) the accounting methods employed.

Question

Quizplus · Accepted Answer

Horizontal analysis involves comparing the dollar amounts and percentages of financial statement items between two or more periods. By focusing on the changes in these amounts and percentages, we can determine whether certain income statement items have increased or decreased and what trends are developing in balance sheet items. A, B, and D are not as relevant to the actual analysis of the financial statements.

In Conducting Horizontal Analysis,it Is Important to Focus Attention on the Changes