Using Common-Size Balance Sheet Percentages to Project Individual Assets,liabilities,or Shareholders

question 28

Multiple Choice

Using common-size balance sheet percentages to project individual assets,liabilities,or shareholders' equity has all of the following shortcomings except:

• A) Individual assets, liabilities, and shareholders' equity are not independent
• Of each other.
• B) If a company experiences changing proportions for investments in securities among its assets, other asset categories may show decreasing percentages in some years even though their dollar amounts are increasing.
• C) Individual assets, liabilities, and shareholders' equity are independent
• Of each other.
• D) The common-size percentages do not permit the analyst to easily change
• The assumptions about the future behavior of an individual asset or liability.

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Definitions:

Reasoning

The mental process of deriving conclusions, judgments, or inferences from facts or premises, often involving logical thought.

Feeling

An emotional state or reaction to stimuli, often subjective and not always based on fact.

Behaving

Acting in a manner according to certain standards, rules, or expectations in social contexts.

Heteronomous Morality

The first stage of moral development in Piaget’s theory, occurring from 4 to 7 years of age. Justice and rules are conceived of as unchangeable properties of the world, beyond the control of people.