Horizontal analysis of income statements a. shows individual revenue and expense items as a percentage of net income. b. shows changes in individual asset, liability, and equity items over time. cpares individual income statement items to those on the income statements of other companies. d. uses the earlier income statement as the base for computing percentage changes.

The correct answer is letter "D": uses the earlier income statement as the base for computing percentage changes.

Explanation:

Horizontal Analysis compares a company's Balance Sheet or Income Statement over two or more accounting periods. The earliest Income Statement will be considered as the base for comparing changes over the firm's performance in other years. It is called horizontal analysis because it displays numbers in rows, side by side, where changes are clear to see.

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