1. A comparative financial statement is a statement that shows the financial positions of successive business years side by side. 2. An Increase or Decrease column and a Percent Change column are added to comparative financial statements to make them more meaningful. 3. To calculate the percentage increase, subtract Year 1 net income from Year 2 net income. This gives the increase amount. Then divide this figure by Year 1 net income and multiply by 100 to get the percentage increase. Percentage Increase: ($15200$13700)$13700100=10.9% The percentage increase for this company's net income is 10.9%. 4. A common-sized financial statement is a statement that expresses all the figures as percentages of a chosen number. 5. Common-size statements help accountants communicate the financial numbers more clearly to their clients and make it easier to compare statements between companies, regardless of size. 6. The two aspects associated with accounting ratios and percentages are liquidity and profitability. 7. A liquidity ratio is used to decide how easily a company can pay its debts. 8. A profitability percentage is used to evaluate a company's ability to earn a profit. 9. Once ratios and percentages have been calculated, the figures should be compared with the results of other years, other companies, and other investment opportunities. 10. The collection period is calculated by dividing the accounts receivable figure by the average charge sales per day. 11. The collection period figure gives an indication of how long it usually takes for the company to collect an account receivable. 12. The inventory turnover is calculated by dividing the cost of goods sold figure by the average inventory figure. 13. The inventory turnover figure gives an indication of how quickly the company is able to sell its inventory. 14. The turnover figure for a fruit market would be very high. The merchandise is perishable and must be sold quickly so the inventory is sold and replaced many times in a year. The turnover figure for a gift store would be much lower because there is not a weekly demand for gifts like there is for food. 15. Public corporations are required to make their financial statements available to the public. Private corporations do not sell shares to the public so they can keep their financial statements private