Which of the following methods analyzes the percentage change in financial statement items over time?

Horizontal analysis is the correct method for analyzing the percentage change in financial statement items over time. This technique involves comparing financial data from a current period to one or more past periods, allowing an analyst to identify trends and patterns in performance. By calculating the percentage change between the periods for specific line items, we gain insights into growth or decline in various aspects of financial performance.

For example, if a company’s sales were $100,000 last year and $120,000 this year, a horizontal analysis would reveal a 20% increase in sales. This information can be crucial for stakeholders analyzing the company's operational efficiency and growth trajectory.

In contrast, vertical analysis looks at financial statement components as a percentage of a baseline figure, such as total revenue or total assets, within a single period, rather than comparing across multiple periods. Ratio analysis focuses on assessing the relationships between different financial statement items to evaluate financial health, liquidity, profitability, or efficiency, and does not specifically measure changes over time. Index analysis tracks the relative change in data over time using a base year as a reference point to illustrate changes in a clearer format but is not the primary method for determining percentage changes across financial statements.