Accounting Practice Discussion Questions 1. How is percentage change in a financial statement line item calculated? 2. Which amount is the base amount for vertical analysis of an income statement? 3. Which amount is the base amount for vertical analysis of a balance sheet? 4. What is the purpose of a common-size financial statement? 5. The Financial Accounting Standards Board and the International Accounting Standards Board have identified the goal of comparability of financial statements as one toward which all companies should strive and consistency as the means of achieving that goal. How are these characteristics important to horizontal and vertical analysis? 6. What is benchmarking? What should a company that wishes to use benchmarking look for in establishing benchmarks? 7. What are the major goals of each of the following types of ratios? a. Liquidity ratios b. Asset management ratios C. Solvency ratios d. Profitability ratios e. Market analysis ratios 8. How would you expect a recession to affect asset management ratios? 9. What is a red flag" with respect to financial statement analysis? 10. A company has experienced increases in accounts receivable and inventory turnover ratios and has net cash flow from operations that exceeds net income. All other things constant, what could you conclude about the company's performance this year relative to last year