Question

Comparative statements are also known as:

• A. Horizontal analysis
• B. Vertical analysis
• C. Ratio analysis
• D. Trend analysis

Hint:

Remember: \[ \text{Comparative Statements} = \text{Horizontal Analysis} \] \[ \text{Common Size Statements} = \text{Vertical Analysis} \]

Answer 1

The Correct Option is A

Concept: Comparative Financial Statements are statements in which financial data of two or more years are presented side by side for comparison. The purpose is to study changes in performance over different accounting periods. This method of analysis is known as Horizontal Analysis because comparison is made across different years.

Step 1: Understand comparative statements.
Suppose a company's sales are: \[ 2023 = ₹8,00,000 \] \[ 2024 = ₹10,00,000 \] The increase can easily be observed by comparing both years. This comparison helps in decision making.

Step 2: Why is it called Horizontal Analysis?
Data from multiple years is placed horizontally. Example: \[ \begin{array}{c|c|c} \text{Particulars} & 2023 & 2024 \hline \text{Sales} & 8,00,000 & 10,00,000 \end{array} \] Comparison is made across years. Hence it is called Horizontal Analysis.

Step 3: Differentiate from Vertical Analysis.
Vertical Analysis studies the relationship between items within the same financial statement. Example: \[ \text{Gross Profit as % of Sales} \] for one particular year. Therefore it is different from comparative statements.

Step 4: Evaluate the options.
Option (A): Horizontal Analysis. Correct. Option (B): Vertical Analysis. Incorrect. Option (C): Ratio Analysis is a different technique. Incorrect. Option (D): Trend Analysis is related but not the direct synonym of comparative statements. Incorrect.

Step 5: Choose the correct answer.
Thus comparative statements are known as: \[ \boxed{\text{Horizontal Analysis}} \] Hence, \[ \boxed{(A)} \]