Which of the following statements describes how to conduct a horizontal analysis?

Compare amounts of a recent year to a future year and identify growth trends.

Compare amounts of a base year to a future year and identify growth trends.

Compare amounts from a recent year to a base year and identify growth trends.

Compare amounts of a prior year to a base year and identify growth trends.

Compare amounts from a recent year to a base year and identify growth trends.

Explanation:

Horizontal analysis (also defined as pattern analysis) is a method for the study of financial reporting that indicates improvements in the sums of the respective financial statements over a span of time. This is a valuable method for determining patterns. Statements over two or more cycles shall be required over lateral study.

In a horizontal analysis, you equate transactions with one another over time periods — in eg, accounts receivable (A / R) in 2014 and A / R in 2015.

To conduct a vertical report, pick an investment account (comparable to gross revenue) and add all balance sheet funds as a ratio.

a. money supply  

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