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Horizontal Analysis in Financial Accounting
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Horizontal Analysis in Financial Accounting

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Questions and Answers

What type of analysis allows financial statement users to easily spot trends and growth patterns?

  • Comparative Analysis
  • Horizontal Analysis (correct)
  • Vertical Analysis
  • Trend Analysis
  • Which analysis is characterized by the use of absolute or percentage comparison with the previous or historical period as a baseline?

  • Trend Analysis
  • Vertical Analysis
  • Horizontal Analysis (correct)
  • Comparative Analysis
  • In what way can horizontal analysis potentially manipulate the perception of the current period's performance?

  • By comparing data quarter by quarter
  • By comparing data annually
  • By comparing historical data with improved performance periods
  • By comparing historical data with poor performance periods (correct)
  • What is another name for horizontal analysis that highlights its comparison to a base year?

    <p>Base-Year Analysis</p> Signup and view all the answers

    Which type of analysis involves visualizing current and historical performance to predict future company performance?

    <p>Trend Analysis</p> Signup and view all the answers

    What does trend analysis generally involve to generate a reliable trend line?

    <p>$ Change from the previous year</p> Signup and view all the answers

    Which type of analysis focuses on multiple accounting periods to analyze financial ratios or line items?

    <p>Horizontal Analysis</p> Signup and view all the answers

    When examining growth patterns in financial statements, which analysis is specifically used for percentage growth over the same line item from the base year?

    <p>Horizontal Analysis</p> Signup and view all the answers

    What does horizontal analysis primarily show when comparing financial information over multiple accounting periods?

    <p>Percentage growth over the base year.</p> Signup and view all the answers

    In horizontal analysis, what might selecting historical periods of poor performance as a comparison potentially do?

    <p>Make current performance look worse than it is.</p> Signup and view all the answers

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