ACC201 Chapter 14

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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

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