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 statement of 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.

Question

Quizplus · Accepted Answer

Horizontal analysis involves converting financial statements into change or percentage format to compare changes over time. The statement of cash flows is already presented as a change statement, so there is no need to convert it. Therefore, horizontal analysis is only performed on the income statement and balance sheet, which are presented in a traditional report format.

Why Is It That Horizontal Analysis Is Performed Only on the Income