What does Base year analysis in horizontal analysis focus on?

Base year analysis in horizontal analysis is primarily concerned with comparing current financial data to a singular benchmark year, known as the base year. This method provides insights into trends over time by allowing analysts to see how various financial documents, such as income statements or balance sheets, have changed relative to that base year.

By using a base year as a reference point, businesses and analysts can identify growth patterns, recognize fluctuations in revenue and expenses, and gauge overall financial performance. This context is valuable for making informed decisions about future strategies and improvements, as it lays a clear foundation for understanding how the business has evolved over time.

The other options may not accurately represent the focus of base year analysis. While estimating future revenues, assessing operational efficiency, and calculating sales growth are important aspects of financial analysis, they do not specifically relate to the comparative nature of base year analysis in horizontal analysis, which emphasizes the importance of tracking changes against a consistent baseline.