Question

Which financial analysis is also known as 'horizontal analysis'?

• A. Cash Flow Analysis
• B. Ratio Analysis
• C. Comparative Statements
• D. Common Size Statements

Hint:

Horizontal analysis compares the same item across different years. Common size statements are its vertical counterpart.

Answer 1

The Correct Option is C

Step 1: Think about the direction of reading.
The word "horizontal" means we read across a row, moving from one year to the next for the same item. So we want a tool that compares years.

Step 2: Sort the four tools by what they compare.
Cash flow analysis tracks cash movement in a year. Ratio analysis links two numbers of the same period. Common size statements express items as a percentage of one total in one year. Comparative statements set several years next to each other.

Step 3: Pick the match.
Only comparative statements compare the same item over several years. This is the horizontal view.

Step 4: Rule out the vertical tool.
Common size statements are the vertical counterpart. They read down a single column, so they cannot be the horizontal analysis.

Step 5: Conclude.
Horizontal analysis is another name for the comparative statements method.
\[ \boxed{\text{Comparative Statements}} \]

Final Answer:
Comparative Statements (option 3) is also called horizontal analysis.