All of the Following Statements Regarding Vertical Analysis Are True

question 196

Multiple Choice

All of the following statements regarding vertical analysis are true except

• A) vertical analysis may be prepared for several periods to analyze changes in relationships over time
• B) in a vertical analysis of a balance sheet, each asset item is stated as a percent of total assets
• C) in a vertical analysis of an income statement, each item is stated as a percent of total expenses
• D) major differences between a company's vertical analysis and industry averages should be investigated

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Definitions:

Prospect Theory

A behavioral economic theory that describes how people choose between probabilistic alternatives that involve risk, where the probability of outcomes is known.

Marginal Disutility

The added dissatisfaction or inconvenience experienced by consuming one more unit of a good or service.

Marginal Utility

The extra utility a consumer obtains from the consumption of 1 additional unit of a good or service; equal to the change in total utility divided by the change in the quantity consumed.

Absolute Terms

A method of expression or measurement that is independent of other variables or comparisons, focusing on intrinsic values.