Which of the Following Statements Regarding a Horizontal Analysis Is

question 71

Multiple Choice

Which of the following statements regarding a horizontal analysis is false?

• A) A horizontal analysis is used to compare an item in a current statement with the same item in prior statements.
• B) A horizontal analysis can be performed on a balance sheet and income statement, but not on a statement of cash flows.
• C) If Fees Earned in Year 1 is $125,000 and Fees Earned in Year 2 is $143,750, a horizontal analysis will indicate a 15% increase over this period.
• D) When two statements are compared in horizontal analysis, the earlier statement is used as the base for computing the amount and the percent of change.

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Definitions:

Stockholders

Individuals or entities that own shares of stock in a corporation, thereby owning a portion of the company.

Liabilities

Financial obligations or debts that a company owes, which it must pay back in the future.

Assets

Resources owned by a business or individual that have economic value.

Statement of Cash Flows

A financial report that summarizes the amount of cash and cash equivalents entering and leaving a company, categorized into operating, investing, and financing activities.