# ACC201 Chapter 14

20 Questions - Developed by: Karli - Developed on: - 4.276 taken

## Chapter 14

• 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 concerned with the format used to prepare financial statements
• 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 2012 and \$154 in 2013, the percentage increase in sales from 2012 to 2013 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 computed
• 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
• 16
Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%
• 17
In the vertical analysis of the income statement, each item is generally stated as a percentage of net income
• 18
A ratio can be expressed as a percentage, a rate, or a proportion
• 19
A solvency ratio measures the income or operating success of an enterprise for a given period of time
• 20
The current ratio is a measure of all the ratios calculated for the current year