Financial Statement

In: Business and Management

Submitted By rhainelara
Words 3914
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Chapter 19 Study Questions

TRUE-FALSE STATEMENTS

1. Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.

2. Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles.

3. Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments.

4. Analysis of financial statements is enhanced with the use of comparative data.

5. Comparisons of company data with industry averages can provide some insight into the company's relative position in the industry.

6. Vertical and horizontal analyses are concerned with the format used to prepare financial statements.

7. Horizontal, vertical, and circular analyses are the most common tools of financial statement analysis.

8. Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

9. Another name for trend analysis is horizontal analysis.

10. If a company has sales of $110 in 2000 and $154 in 2001, the percentage increase in sales from 2000 to 2001 is 140%.

11. In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be calculated.

12. Common size analysis expresses each item within a financial statement in terms of a percent of a base amount.

13. Vertical analysis is a more sophisticated analytical tool than horizontal analysis.

14. Vertical analysis is useful in making comparisons of companies of different sizes.

15. Meaningful analysis of financial statements will include either horizontal or vertical analysis, but not both.…...

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