Horizontal Analysis of Comparative Financial Statements Includes the

question 106

Multiple Choice

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.

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Definitions:

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.

Variable-Rate Loan

A loan where the interest rate can change, based on an underlying benchmark or index that reflects the cost to the lender of borrowing on the credit markets.

Increases In Interest Rates

A scenario where central banks or financial institutions decide to raise the cost of borrowing money.

Cap

An upper limit set on the amount of money that can be charged or paid in a certain situation, such as interest rates on a loan or fees.