The Formula for Horizontal Analysis of Changes Since the Base

question 153

Multiple Choice

The formula for horizontal analysis of changes since the base period is the current year amount

• A) divided by the base year amount.
• B) minus the base year amount divided by the base year amount.
• C) minus the base year amount divided by the current year amount.
• D) plus the base year amount divided by the base year amount.

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Definitions:

Depreciation

The allocation of the cost of an asset over its useful life, reflecting the decrease in value due to use and age.

Terminal Growth Rate

The rate at which a company's free cash flow is expected to grow at indefinitely, used in the discounted cash flow analysis to estimate a company's value.

Plowback Ratio

The proportion of earnings retained by a business, rather than paid out as dividends, to reinvest in its core activities.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis.