Question

An analyst discovers that inventory increased by 15% from one year to the next. This is an example of

A) horizontal analysis
B) vertical analysis
C) qualitative analysis
D) none of the above

Answer 1

The increase in inventory by 15% from one year to the next is an example of horizontal analysis, which compares financial data over time to determine growth or decline rates.

Step-by-step explanation:

When an analyst discovers that inventory increased by 15% from one year to the next, this scenario is an example of A) horizontal analysis. Horizontal analysis, also known as trend analysis, involves comparing historical financial data such as sales or inventory over a series of time periods to determine the rate of growth or decline. This type of analysis helps stakeholders understand how a company's performance changes over time.