For Companies That Have Little Change in the Characteristics of Their

question 32

Multiple Choice

For companies that have little change in the characteristics of their inventory items, the most appropriate method for computing a cost index for dollar value LIFO is the

• A)inventory-pool method
• B)double-extension method
• C)weighted-average method
• D)link-chain method

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Definitions:

Vertical Analysis

A method in financial analysis where each entry in a set of financial statements is listed as a percentage of another item, typically used for income statement and balance sheet analysis to show relative proportions.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in net profit or loss.

Common-sized Balance Sheet

A balance sheet in which each line item is expressed as a percentage of total assets, facilitating comparison with other companies regardless of size.

Vertical Analysis

A method of financial statement analysis in which each line item is listed as a percentage of a base figure within the statement, allowing for easy comparison and analysis of different-sized companies.