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:

Divisional Segment Margin

A financial metric that measures the profit or loss generated by a specific division or business segment, assessing its contribution to the overall company performance.

Common Fixed Expenses

Expenses that do not vary with the level of production or sales, and are shared by more than one segment or department within an organization.

Net Operating Income

Income from operations before interest and taxes, reflecting the profitability of a company's core business activities.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted.