The Best Way to Study the Relationship of the Components

question 10

Multiple Choice

The best way to study the relationship of the components of financial statements is to prepare:

• A) common size statements.
• B) a trend analysis.
• C) profitability analysis.
• D) ratio analysis.

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Definitions:

Compounded Annually

A method of calculating interest in which the accumulated interest is added to the principal at the end of each year, with future interest then calculated on the new total.

Percentage Increase

A measure of the degree to which a quantity has grown in proportion to its initial value, expressed as a percentage.

Compounding

The process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.

Average Rate Of Return

A financial ratio that estimates the profitability on an investment over a period.