Financial statements are designed to meet the needs of specific financial statement user groups. Question options: True False The accounting profession assumes that financial statement users have a reasonable knowledge of business. Question 2 options: True False A company has an obligation to provide highly detailed information on its financial statements. Question 3 options: True False Vertical analysis of a balance sheet involves converting each component to a percentage of stockholders' equity. Question 4 options: True False Small percentage changes in an amount from a company's financial statements may still represent large dollar amounts; therefore, analysts should examine changes in both absolute dollar amounts and percentages. Question 5 options: True False When performing horizontal analysis, analysts should examine changes in both absolute dollar amounts and percentages, as well as the underlying reasons for the change. Question 6 options: True False A vertical analysis calculates percentages to compare individual parts of a statement to a key figure on that statement. For example, on an income statement, each item could be shown as a percentage of sales. Question 7 options: True False A drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels. Question 8 options: True False While horizontal analysis examines the behavior of items over two or more accounting periods, vertical analysis compares many items within the same period of time. Question 9 options: True False The current ratio and quick ratio are similar in that both are used to assess a company's ability to pay short-term obligations, but they differ in that the quick ratio excludes the least liquid current assets from the numerator. Question 10 options: True False