A common size income statement is a form of vertical analysis.

Select one:

True

False

The acid-test ratio tells us whether the entity could pay all of its current liabilities if they became due before the end of the fiscal year.

Select one:

True

False

A common size statement is a form of horizontal analysis.

Select one:

True

False

A manager analysing a statement of cash flow reports will understand not only the amount of cash used for the month, but also how the cash was used.

Select one:

True

False

The current ratio tells us whether the entity could pay all of its current liabilities with current assets.

Select one:

True

False

__________ Analysis provides a means of evaluating the relationships between key components of the financial statements.

Ratio

Horizontal

Vertical

Trend

Of the following, which can be used as the base amount when performing a vertical analysis of a balance sheet?

Total Liabilities and Stockholders' Equity

Current Assets

Current Liabilities

Total Liabilities

______________ is the process of analysing the percentage changes in comparative financial statements from year to year.

Benchmarking

Trend Analysis

Vertical Analysis

Horizontal Analysis

To help forecast future performance of specific areas of a companys financials, what technique would you use?

Horizontal Analysis

Vertical Analysis

Benchmarking

Trend Analysis

__________ is computed by setting the base year as 100% and expressing other years as a percentage of the base year.

Vertical Analysis

Trend Analysis

benchmarking

horizontal analysis

As the senior accountant in your organization, you are training your new assistant to conduct a financial statements analysis. Explain to her:

1. The importance of financial statement analysis (6 marks)

2. The three main forms of Financial Statement analysis (6 marks)

3. A detailed description of how to convert an income statement and balance sheet to common-size. (8 marks)