All of the Following Statements About Vertical Analysis Are True

question 23

Multiple Choice

All of the following statements about vertical analysis are true except

• A)Vertical analysis is also called common size analysis.
• B)Amounts on the income statement are expressed as a percentage of net sales.
• C)Vertical analysis shows the relative size of each item in the statement of financial position.
• D)Vertical analysis is also called trend analysis.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating short-term financial health and operational efficiency.

Current Assets

Resources anticipated to be turned into cash, sold off, or used up within a year or over the course of the operational cycle, depending on which period extends further.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Accounts Receivable Turnover

A financial metric that measures how many times a company collects its average accounts receivable balance within a specific period.