Asked by Maxine Wiebenga on Jul 16, 2024
Verified
A horizontal analysis of an income statement automatically provides the return on sales ratio and the gross profit ratio.
Horizontal Analysis
A financial analysis technique that compares historical financial data over a series of periods to identify trends and growth patterns.
Gross Profit Ratio
A financial metric indicating the proportion of money left from revenues after accounting for the cost of goods sold, presented as a percentage.
Return on Sales Ratio
A financial metric that measures the efficiency of a company in generating profits from its sales by comparing net income to total sales revenue.
- Acquire knowledge of different financial analysis strategies such as horizontal, vertical, and ratio analysis.
- Gain insight into the link between ratios used in financial management and the performance of business operations, with an emphasis on managing assets, liabilities, and earnings.
Verified Answer
KA
Keyla AdeetaJul 23, 2024
Final Answer :
False
Explanation :
A horizontal analysis of an income statement focuses on the changes in financial statement items over time, comparing line items in each period to a base period. It does not automatically provide ratios like the return on sales or gross profit ratio, which require specific calculations related to sales and gross profit.
Learning Objectives
- Acquire knowledge of different financial analysis strategies such as horizontal, vertical, and ratio analysis.
- Gain insight into the link between ratios used in financial management and the performance of business operations, with an emphasis on managing assets, liabilities, and earnings.