All of the Following Statements Regarding a Horizontal Analysis Are

question 220

Multiple Choice

All of the following statements regarding a horizontal analysis are true except

• 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 2010 are $150,000 and fees earned in 2011 are $187,500, a horizontal analysis will indicate a 25% 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.

---

Definitions:

Limited Liability

The legal principle that limits each owner's financial loss to the amount of money that individual has invested in a company.

Partnership Name

The official legal name under which a partnership business operates and is recognized.

Both Partners

In the context of business or law, it refers to the mutual and joint responsibility or involvement of two parties in an agreement or venture.

Individual Partner

A member of a partnership who contributes capital, participates in management, and is personally liable for partnership debts.