Asked by Mannat Rattan on May 29, 2024
Verified
Vertical analysis is a more sophisticated analytical tool than horizontal analysis.
Vertical Analysis
A financial statement analysis method where each entry for each category is listed as a percentage of a base figure within the statement.
Horizontal Analysis
A financial analysis technique that compares line items in financial statements over different periods to identify trends.
- Distinguish the distinctions between horizontal (trend) analysis and vertical analysis within the context of preparing and interpreting financial statements.
Verified Answer
RB
Ruchika BatishMay 30, 2024
Final Answer :
False
Explanation :
Vertical analysis evaluates each line item as a percentage of a base figure within the same period, making it simpler and more straightforward, whereas horizontal analysis looks at amounts across multiple periods, requiring more complex comparisons and trend analysis.
Learning Objectives
- Distinguish the distinctions between horizontal (trend) analysis and vertical analysis within the context of preparing and interpreting financial statements.
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