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(T / F) Horizontal analysis is the calculation of dollar changes or percentage changes in comparative statement items or totals. Use of this analysis helps detect changes in a company's performance and highlights trends.

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(T / F) Vertical analysis consists of a study of a single financial statement in which each item is expressed as a percentage of a significant total.

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(T / F) Equity, or long-term solvency, ratios show the relationship between debt and equity financing in a company. These ratios include (1) equity (stockholders' equity) ratio and (2) stockholders' equity to debt ratio.

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(T / F) An objective of financial statement analysis is to provide information about the company's past performance and current financial position.

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(T / F) Vertical analysis helps detect changes in a company's performance over several periods and highlights trends.

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(T / F) Common-size statements provide information about changes in dollar amounts relative to the previous periods.

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(T / F) Liquidity ratios show a company's capacity to pay maturing current liabilities.

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(T / F) Financial statement analysts must be sure that comparable data are used among companies to make the comparisons valid.

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(T / F) An equity investor is more focused on the Gross Profit Ratio than the Return on Sales ratio.

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(T / F) Assume that Company A does not have any prepaid expenses on its balance sheet. If the Current Ratio is 1 and the Quick Ratio is 0.8, inventory equals 20% of current liabilities.

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