Horizontal analysis is performed on information from: A. Only the balance sheet
ID: 2433152 • Letter: H
Question
Horizontal analysis is performed on information from: A. Only the balance sheet B. Only the statement of cash flows C. Only the income statement D. The income statement, the balance sheet, and the statement of cash flows Horizontal analysis is performed on information from: A. Only the balance sheet B. Only the statement of cash flows C. Only the income statement D. The income statement, the balance sheet, and the statement of cash flows A. Only the balance sheet B. Only the statement of cash flows C. Only the income statement D. The income statement, the balance sheet, and the statement of cash flowsExplanation / Answer
The correct answer is Option 'D' Horizontal Analysis can be performed on Income Statement, Balance Sheet, as well as the Statement of Cash Flows.
Horizontal Analysis involves comparison of percentage change (increase/decrease) in any item over two or more periods.
Examples of Horizontal Analysis on all the financial statements:
Income Statement
2014
2013
Increase (Decrease)
Service Revenue
$ 2,400,000.00
$ 2,000,000.00
$ 400,000.00
20.00%
Expenses
$ 1,500,000.00
$ 1,000,000.00
$ 500,000.00
50.00%
Net Income
$ 900,000.00
$ 1,000,000.00
$ (100,000.00)
-10.00%
Balance Sheet
2014
2013
Increase (Decrease)
Assets
$ 5,000,000.00
$ 4,000,000.00
$ 1,000,000.00
25.00%
Liabilities
$ 2,000,000.00
$ 2,500,000.00
$ (500,000.00)
-20.00%
Equity
$ 3,000,000.00
$ 1,500,000.00
$ 1,500,000.00
100.00%
Statement of Cash Flows
2014
2013
Increase (Decrease)
Cash flows from operating activities
$ 20,000.00
$ 30,000.00
$ (10,000.00)
-33.33%
Cash flows from investing activities
$ 10,000.00
$ (20,000.00)
$ 30,000.00
150.00%
Cash flows from Financing activities
$ 30,000.00
$ 40,000.00
$ (10,000.00)
-25.00%
Increase (Decrease) in Cash
$ 60,000.00
$ 50,000.00
$ 10,000.00
20.00%
Cash at beginning
$ 100,000.00
$ 50,000.00
$ 50,000.00
100.00%
Cash at end
$ 160,000.00
$ 100,000.00
$ 60,000.00
60.00%
Income Statement
2014
2013
Increase (Decrease)
Service Revenue
$ 2,400,000.00
$ 2,000,000.00
$ 400,000.00
20.00%
Expenses
$ 1,500,000.00
$ 1,000,000.00
$ 500,000.00
50.00%
Net Income
$ 900,000.00
$ 1,000,000.00
$ (100,000.00)
-10.00%
Balance Sheet
2014
2013
Increase (Decrease)
Assets
$ 5,000,000.00
$ 4,000,000.00
$ 1,000,000.00
25.00%
Liabilities
$ 2,000,000.00
$ 2,500,000.00
$ (500,000.00)
-20.00%
Equity
$ 3,000,000.00
$ 1,500,000.00
$ 1,500,000.00
100.00%
Statement of Cash Flows
2014
2013
Increase (Decrease)
Cash flows from operating activities
$ 20,000.00
$ 30,000.00
$ (10,000.00)
-33.33%
Cash flows from investing activities
$ 10,000.00
$ (20,000.00)
$ 30,000.00
150.00%
Cash flows from Financing activities
$ 30,000.00
$ 40,000.00
$ (10,000.00)
-25.00%
Increase (Decrease) in Cash
$ 60,000.00
$ 50,000.00
$ 10,000.00
20.00%
Cash at beginning
$ 100,000.00
$ 50,000.00
$ 50,000.00
100.00%
Cash at end
$ 160,000.00
$ 100,000.00
$ 60,000.00
60.00%
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