Computing a Percentage Change in Horizontal Analysis Requires Two Steps

question 67

Multiple Choice

Computing a percentage change in horizontal analysis requires two steps. The first step is compute the dollar amount of the change from the base period to the next period and the second step is to:

• A)divide the dollar amount of the change by the current period amount.
• B)multiply the dollar amount of the change by the current period amount.
• C)divide the dollar amount of the change by the base-period amount.
• D)multiply the dollar amount of the change by the base-period amount.

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Definitions:

Collect Cash

The process of receiving cash in exchange for goods or services rendered, contributing to a company's cash inflows.

Pay Cash

The act of settling a transaction or purchasing goods and services by using physical currency or digital equivalents thereof.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations by comparing current assets to current liabilities.

Inventory Turnover Ratio

A measure of how frequently a company sells and replaces its inventory over a certain period; calculated as cost of goods sold divided by the average inventory.