Which of the Following Statements About Financial Statement Analysis Is

question 98

Multiple Choice

Which of the following statements about financial statement analysis is incorrect?

• A)In horizontal percentage analysis,an item from the financial statements is expressed as a percentage of the same item from a previous year's financial statements.
• B)Vertical analysis compares two or more financial statement items within the same time period.
• C)Horizontal analysis for several years can be done by choosing one year as a base year and calculating increases or decreases in relation to that year.
• D)The reason behind a financial statement ratio or percentage analysis result is usually self-evident and does not require further study or analysis.

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Definitions:

Planning Budget

A forecast of revenue, expenses, and cash flow used by organizations to plan for the upcoming period.

Occupancy Expenses

Costs related to occupying a physical space, such as rent, utilities, and property taxes.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity level, allowing better analysis and control over performance.

Administrative Expenses

Costs related to the general operation of a company, including expenses such as salaries of non-sales personnel, and office supplies.