Ch.13

4) How do horizontal analysis and vertical analysis of financial statements differ?

5) "Financial statement users should focus attention on each item showing a large percentage change from one year to the next." Is this statement correct? Why?

6) What are trend percentages and how are they calculated? What pitfalls must financial statement users avoid when preparing trend percentages?

7) What are common-size financial statements and how are they used?

8) What item is the key figure (that is, 100 percent) in a common-size income statement? A common-size balance sheet?