Explain the difference between horizontal analysis and vertical analysis of a company's financial statements.
What will be an ideal response?
Answers will vary.
Horizontal analysis means examining individual items from the financial statements over a period of time; it is also called trend analysis. For example, calculating the percentage change in sales over the past four years would be a form of horizontal analysis. Vertical analysis is conducted within the financial statements for a single period. For example, the amounts of cost of goods sold, gross margin, operating income, and net income for the current year might all be compared to the amount of sales revenue for that year.
You might also like to view...
Stock splits:
A. are a type of dividend. B. change the retained earnings account. C. decrease the number of shares outstanding. D. change the par value of the shares.
For a month's transactions for a typical medium-sized business, the salary expense account is likely to have only credit entries
Indicate whether the statement is true or false
Fly High Airlines acquires a new aircraft. It has an estimated life of 10 years and should be used for 20,000 hours of flight. What is the most appropriate method of depreciation to properly match revenues and expenses?
A) Double-declining-balance method B) Revenue expenditure method C) Straight-line method D) Units-of-activity method
Contemporary law's principle of collective responsibility, such as all partners being personally responsible for the debts of the partnership, had its roots in the
a. Anglo-Saxon method of ensuring public order through tithing. b. Anglo-Saxon practice of using "oath helpers.". c. English use of "shire reeves.". d. English system of feudalism.