Asked by Jennifer Robert on May 07, 2024
Verified
A percentage analysis of increases and decreases in related items on comparative financial statements
A) Solvency
B) Leverage
C) Times interest earned
D) Horizontal analysis
E) Vertical analysis
F) Common-sized financial statements
G) Current position analysis
H) Profitability analysis
Horizontal Analysis
An accounting method used to compare financial data across multiple periods, showing changes in dollar amounts and percentages to identify trends.
Percentage Analysis
A financial analysis technique that involves expressing each item within a financial statement as a percentage of a base amount to identify financial trends over different periods.
Comparative Financial Statements
Financial statements that present financial data for two or more periods side by side, facilitating period-to-period comparisons.
- Understand vertical and horizontal analysis, and their application in financial statement analysis.
Verified Answer
Answer: E
Vertical analysis compares each item on a financial statement as a percentage of a base amount, typically the net sales on an income statement or total assets on a balance sheet.
Answer: F
Common-sized financial statements present financial statements in a standardized format making it easier to compare financial data across entities or industries.
Answer: G
Current position analysis reviews an entity's liquidity, or its ability to meet short-term obligations, through current assets and current liabilities.
Answer: H
Profitability analysis measures the entity's ability to generate profits, typically measured by return on assets, return on equity or profit margin ratios.
Learning Objectives
- Understand vertical and horizontal analysis, and their application in financial statement analysis.
Related questions
The Three Basic Tools of Analysis Are Horizontal Analysis Vertical ...
The Following Information Was Taken from the Financial Statements of ...
If a Company Is Comparing Its Financial Condition or Performance ...
Intra-Company Analysis Is Based on Comparisons with Competitors
In a Vertical Analysis, the Base for Cost of Goods ...