Identify and Describe Three Common Tools of Financial Statement Analysis

question 53

Essay

Identify and describe three common tools of financial statement analysis.

Distinguish between variable, fixed, and mixed costs.

Estimate variable cost per unit/activity.

Estimate fixed cost per period.

Prepare a contribution format income statement.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a framework of accounting standards, principles, and procedures from which financial statements are prepared in the United States.

Cumulative

Pertaining to an aggregate or total amount added up over time, often used in context with dividends that are accumulated if not paid out.

Noncumulative

A term often used in dividends policy, indicating that if a dividend is not paid out, it doesn't accumulate for future payment.

U.S. GAAP

United States Generally Accepted Accounting Principles, which constitute the framework of guidelines for financial accounting used in the US.