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Exam 12: Financial Statement Analysis

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Question 51

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Which of the following is NOT an example of cross sectional analysis?

A) determining how the growth in sales from one company differed from that of another company
B) comparing growth in sales across different industries
C) determining the growth in sales for a company over a five-year period
D) comparing total sales across companies in the same industry for the past three years

E) C) and D)
F) B) and C)

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Question 52

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Common-size analysis involves converting the percentage values in the financial statements to dollar values.

A) True
B) False

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Question 53

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An analytical tool for comparing two companies of different sizes is

Ratios exhibit the relationship between figures from year to year and the reason for the changes year to year.

Which of the following descriptions best describes trend analysis?

Given the following data: sales $1,500,000; gross profit $640,000; net income $40,000 and income tax expense $35,000. What is the common-size percentage for operating expenses?

Return on equity is a measure of performance from management's perspective.

Which of the following is NOT a general category of ratios?

Review of the financial statements revealed the following for Glitter Inc.: Sales $1,250,000, Net income $37,500, Total assets $650,000, Long-term debt $750,000, Interest expense $65,000 and Cost of goods sold $775,000. When preparing common-size financial statements, interest expense would be shown as

Retrospective analysis is using the past to predict future trends.