Which of the Following Statements Is True Regarding Vertical Analysis

question 188

Multiple Choice

Which of the following statements is true regarding vertical analysis?

• A)Cross-sectional analysis compares financial data for a single entity over time.
• B)Common size financial statements are used to compare companies of different sizes.
• C)Trend analysis compares a company's financial data to industry averages.
• D)Time series analysis is effective for comparison of different companies over time.

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Definitions:

Fixed Expenses

Costs that do not change with the level of output or sales in the short term, such as rent, salaries, and insurance.

Break-even Point

The juncture where the sum of all costs matches the total income, leading to neither a profit nor a loss.

Contribution Margin Ratio

A financial ratio that measures the proportion of revenue remaining after variable costs have been deducted, indicating how much contributes to covering fixed costs and generating profit.

Fixed Monthly Expenses

Regularly occurring costs that do not vary in amount from one month to the next, such as rent or loan payments.