Trend analysis Question 1 options: 1) Is not useful when evaluating the underlying drivers of a companys return on equity.

2) Is superior to common size analysis in analyzing the companys financial health 3) Allows the analyst to draw conclusions about the companys financial health over time. 4) None of the above all statements are true. Which of the following is not a potential problem when developing a trend analysis based upon percentage changes from year-to-year?

Question 3 options: 1) The lack of reference to a base dollar amount in order to make valid inferences on the relative magnitude of the changes. 2) A negative amount in Year 2 of a balance sheet item and a positive amount in Year 3. 3) Comparing yearly amounts with an average computed over all years to highlight unusual changes. 4) A change in LT Debt from $100,000 in Year 3 to $0 in Year 4.

Question 4 (1 point) For a technology dependent firm, a past trend is a good predictor of future trends when: Question 4 options: 1) The past trends are similar to industry past trends. 2) The drivers of past firm performance will be unchanged over the forecast period. 3) When there is considerable uncertainty about the industry outlook. 4) All of the above statements are true.

Question 5 (1 point) Which of the following is true of common-size income statements? Question 5 options: 1) Each income statement item is dividend by sales. 2) Income statement accounts are presented as a percentage of total assets. 3) A common-size comparison results in more dissimilarities than when comparing on a dollar basis. 4) Common size income statements cant be used to compare firms of different size. 5) All of the above are income statement items.

Question 6 (1 point) Which of the following statements is false as it relates to common-size balance sheets? I. Examining a firms current assets and long term assets as a percentage of total assets can help determine whether a company is becoming more or less liquid. II. A firm with an increasing dollar amount of debt but a decreasing percentage of debt to assets is relying more heavily on debt. III. Common size balance sheets are determined by dividing items by total sales. Question 6 options: 1) I only 2) II only 3) I and II 4) II and III 5) I, II, and III

Question 7 (1 point) Which of the following are true as it relates to common size statements? Question 7 options: 1) Common size analysis is useful in identifying company trends across time but not in comparing a firm to an industry. 2) A common size analysis of ROE cannot provide insight into why a firms ROE is falling when the industry average has been increasing. 3) Common size analysis assists comparison of companies across firms and over time. 4) Common size analysis can be developed by dividing all income statement and balance sheet items by either total sales or total assets. Question 8 (1 point) Ratio analysis is useful in evaluating a firm: