Horizontal Analysis Is Analysis in Which

question 27

Multiple Choice

Horizontal analysis is analysis in which:

• A) financial statement lines are expressed as a percent of the base (earliest) year.
• B) all items are presented as a percentage of one selected item on the financial statement.
• C) a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements.
• D) ratios are presented for the past two accounting periods.

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Definitions:

Default Risk

The potential risk that an issuer of a bond or other debt security will be unable to make principal and interest payments when due.

Collateral Trust Bond

A type of bond that is secured by a pledge of collateral, typically securities, placed under the trust of a third party.

Securities

Financial instruments representing ownership (stocks), a debt agreement (bonds), or rights to ownership (derivatives) that can be bought and sold in financial markets.

Equipment

Physical assets used in the operation of a business, including machinery, tools, and vehicles.