Multiple Choice
The comparison of a company's financial condition and performance to a base amount is known as:
14. Financial Statement Analysis
Horizontal Analysis
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Which of the following terms is another name for horizontal analysis in financial accounting?
A
Common-size analysis
B
Trend analysis
C
Vertical analysis
D
Ratio analysis
Verified step by step guidance1
Understand the concept of horizontal analysis: Horizontal analysis is a method used in financial accounting to evaluate trends over time by comparing financial data across multiple periods.
Recognize that horizontal analysis is also referred to as trend analysis because it focuses on identifying patterns or changes in financial performance over time.
Differentiate horizontal analysis from other terms: Common-size analysis involves expressing financial statement items as percentages of a base amount, vertical analysis examines relationships within a single financial statement, and ratio analysis involves calculating financial ratios to assess performance.
Confirm that the correct term synonymous with horizontal analysis is trend analysis, as it directly relates to analyzing changes over time.
Apply this understanding to similar questions by identifying the purpose and methodology of the analysis described in the question.
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Horizontal Analysis practice set
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