Question

David, a financial accountant at a multinational company, is asked to study the comparative financial statements of a prospective partner firm. He uses comparative income statements to determine the changes in the assets and liabilities of the firm and whether the net income of the firm has increased or decreased over the past five years. In this scenario, David is most likely using _____.

A) activity-based costing.B) horizontal analysis.C) a statistical syllogism.D) static analysis.

Answer 1

B) horizontal analysis

Step-by-step explanation:

Whenever there is a comparative analysis of own performance with past year performances, that is comparison of financial statements of current year with that of preceding year, or number of preceding years then it is said that we are using the technique of horizontal analysis.

Also the meaning can be derived from the word horizontal that is same level, now same level here means of one individual company, with its own past year financial records.

Final Answer

B) horizontal analysis