Is horizontal analysis used to analyze percentage changes in items on financial statements over different accounting periods?

The correct answer is that horizontal analysis is indeed used to analyze percentage changes in items on financial statements over different accounting periods, making the true statement the one that confirms this practice.

Horizontal analysis provides insights into trends and patterns by comparing financial data across successive periods, allowing analysts to understand how financial performance has changed over time. By calculating percentage changes, it becomes easier to identify growth or decline in specific line items, such as revenue, expenses, and profits, which informs decision-making and financial forecasting.

This method helps stakeholders recognize developments in a company's financial health and operational efficiency. For example, if a company's sales have increased by 10% from one year to the next, horizontal analysis clearly highlights that trend, thus guiding strategic choices for future performance.

In this context, the assertion that horizontal analysis is not used for this purpose is incorrect because it fundamentally misunderstands the role and function of horizontal analysis in financial reporting.