Select the Incorrect Statement Regarding Horizontal Analysis

question 27

Multiple Choice

Select the incorrect statement regarding horizontal analysis.

• A)Percentage analysis involves establishing the relationship of one amount to another.
• B)In doing horizontal analysis, an account is expressed as a percentage of the previous balance of the same account.
• C)Percentage analysis attempts to eliminate the materiality problem of comparing firms of different sizes.
• D)A horizontal analysis of cost of goods sold on the income statement includes dividing net income by total revenue.

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Definitions:

Poisson Distribution

A distribution quantifying the chances of a specific amount of occurrences happening within a set period or spatial region.

Probability

A measure of the likelihood that a certain event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Sales

The exchange of a commodity for money; the action of selling something.

Poisson Approximation

A statistical technique used to estimate the probability of a given number of events happening in a fixed interval of time or space, assuming these events occur with a known constant mean rate and independently of the time since the last event.