Rags to Riches Selected data from the financial statements are provided below: A

Question

Rags to Riches Selected data from the financial statements are provided below: Accounts Receivable Inventory Total Assets Net Sales Cost of Goods Sold Refer to Rags to Riches. Which of the following would result from a horizontal nalysis of the company's income statement? 2015 2014 $120,000 $76,000 24,000 32,000 900,000 760,000 760,000 540,000 320,000 420,000 a. Gross profit is 57.9% of net sales for 2015. b. Net sales in 2015 increased to 140.74% of the 2014 amount. c. Accounts receivable is 13.3% of total assets in 2015. d. The accounts receivable turnover ratio is 7.76 in 2015. O Icon Kev

Explanation / Answer

Option B is the correct answer.

Explanation:- Horizontal analysis (also known as trend analysis) is a financial statement analysis technique that shows changes in the amounts of corresponding financial statement items over a period of time. It is a useful tool to evaluate the trend situations. The statements for two or more periods are used in horizontal analysis.

Therefore option B is correct answer because it shows the trend of net sales of current year with previous year.

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