Q7 Part 1 We use horizontal analysis to _____.

• distinguish persistent earnings from one-time items

• compare two companies of different sizes

• make company comparisons to industry averages

• analyze trends in financial statement data for a company over time

Q7 Part 2 Which of the following is the denominator in the formula used to calculate the percentage increase or decrease of an item in horizontal analysis?

• Current-year amount Prior-year amount

• Prior-year amount

• Current-year amount

• Prior-year amount Current-year amount

Q7 Part 3 Using horizontal analysis, it is important to look at both the amount of change and the percentage change.

True or False

Q7 Part 4 Piper, Inc. reports cash of $260,000 in Year 1 and $210,000 in Year 2. Using horizontal analysis, what is the percentage increase or decrease in cash?

• (19.2%)

• 19.2%

• (23.8%)

• 23.8%

Q7 Part 5 Provided below is a partial balance sheet for Lilac Corporation.

	Year 1				Year 2
Cash	$	540,000			$	500,000
Accounts receivable		460,000				400,000
Inventory		350,000				300,000
Long-term assets		880,000				900,000
Total assets	$	2,230,000			$	2,100,000

Using horizontal analysis, what percentage is applicable to Accounts Receivable?

• (13.0%)

• 13.0%

• 15.0%

• 20.6%