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Horizontal analysis

3 multiple choice questions on vertical & horizontal analysis.

Multiple Choice:

1. When vertical analysis is performed:

a. Ratios are used to detect fraud.
b. Changes in significant balance totals are examined.
c. Financial statement balances are converted to percentages
d. Total revenues are compared to total expenses.

Multiple Choice:
2. Horizontal analysis is different from vertical analysis in that:

a. There is no difference between horizontal and vertical analysis.

b. Horizontal analysis calculates the percentage change in balance sheet and income statement numbers from one period to the next, while vertical analysis converts balances in a single period to percentages.

c. Horizontal analysis converts balances in a single period to percentages, while vertical analysis calculates the percentage change in balance sheet & income statement numbers from one period to the next.

d. Key ratios are compared from one period to the next.

Multiple Choice:
3. When conducting financial statement analysis, which ratio will be the most useful in determining whether a company has erroneously inflated accounts receivable?

a. Current ratio
b. Profit margin
c. Accounts receivable turnover
d. Debt percentage

Solution Preview

1. When vertical analysis is performed: c. Financial statement balances are converted to percentages

2. Horizontal analysis is different ...

Solution Summary

This discusses the Horizontal analysis

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