How Is Horizontal Analysis Performed and How Is It Used

question 75

Essay

How is horizontal analysis performed and how is it used in financial statement analysis?

Determine cost of goods sold from available financial information.

Perform comprehensive analysis to prepare financial statements including income statement and balance sheet related to manufacturing accounts.

Compute sales revenue and expenses impacting net income.

Analyze changes in inventory accounts and their effects on cost of goods sold and manufactured.

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Definitions:

Precipitation

Any form of water - liquid or solid - that falls from the atmosphere and reaches the ground, including rain, snow, sleet, and hail.

Transpiration

The method through which water is transported within plants from the roots to tiny openings under the leaves, transforming into vapor there and then being emitted into the air.

Evaporation

Evaporation is the process by which water is transformed from a liquid state into vapor, often driven by heat and leading to the cooling of surfaces.

Species

A collection of living beings comprised of comparable individuals who have the ability to exchange genetic material or reproduce with one another.