Question

Answer true or false to the following statements (Due 3/4/2020 - Please submit your answer))

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

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

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

4. Another name for trend analysis is horizontal analysis.

5. In the vertical analysis of the income statement, each item is generally stated as a percentage of net income.

6. A ratio can be expressed as a percentage, a rate, or a proportion.

7. The current ratio is a measure of all the ratios calculated for the current year.

8. Inventory turnover measures the number of times on the average the inventory was sold during the period.

9. Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

10. The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.

Answer 1

1. The Statement is ' True '

2.The Statement is 'True'

3.The Statement is 'False'.

Explanation: circular analysis is not a tool of financial statement analysis.

4. The Statement is 'True'

5.The Statement is 'False'.

Explanation:

In a vertical analysis of an income statement, each item on the income statement is expressed as a percentage of sales.

6.The Statement is 'True'

7.The Statement is 'False'.

Explanation:

Current Ratio is ratio of Current Assets to Current Liabilities

8.The Statement is 'True'

9.The Statement is 'True'

10.The Statement is 'False'.

Explanation:

The rate of return on common stockholders' equity will be greater than the rate of return on Total Assets if the company has been successful in trading on the equity at a gain.