Complete the horizontal analysis below (round to the nearest tenth percent if applicable):
Year 2 & Year 1 & Amount & Percent Change
$88,338 & $92,147 & ? & ?
Multiple Choice
A. $8,300, 15%
B. $3,809, 4.1%
C. $180,485, 51.1%
Answer (1)
Calculate the amount difference: A m o u n t D i ff ere n ce = $88 , 338 − $92 , 147 = − $3 , 809 .
Calculate the percent change: P erce n tC han g e = ( $92 , 147 − $3 , 809 ) × 100 ≈ − 4.1 .
The amount difference is − $3 , 809 .
The percent change is \boxed{-4.1%} .
Explanation
Understanding the Problem We are given the values for Year 2 ($88,338) and Year 1 ($92,147) and need to complete the horizontal analysis by calculating the amount difference and the percent change.
Calculating Amount Difference First, we calculate the amount difference between Year 2 and Year 1. The formula is: A m o u n t D i ff ere n ce = Y e a r 2 − Y e a r 1 Substituting the given values: A m o u n t D i ff ere n ce = $88 , 338 − $92 , 147 = − $3 , 809 So, the amount difference is -$3,809.
Calculating Percent Change Next, we calculate the percent change. The formula is: P erce n tC han g e = Y e a r 1 Y e a r 2 − Y e a r 1 × 100 Substituting the given values: P erce n tC han g e = $92 , 147 $88 , 338 − $92 , 147 × 100 = $92 , 147 − $3 , 809 × 100 P erce n tC han g e = − 0.04133612597 × 100 = − 4.133612597 Rounding to the nearest tenth percent, we get -4.1%.
Final Answer Therefore, the amount difference is -$3,809 and the percent change is -4.1%.
Examples
Horizontal analysis is used in business to compare financial data over a period of time. For example, a company might use horizontal analysis to compare its revenue from one year to the next. This can help the company identify trends and make informed decisions about its business. In this case, the company's revenue decreased by $3,809, which represents a 4.1% decrease from the previous year.
