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:

Purchase

The act of acquiring goods or services in exchange for money, signaling a transfer of ownership.

Assumptive

Pertaining to something that is taken for granted or accepted as true without proof.

Trial

A process of testing or experimenting with a product, service, or idea to evaluate its effectiveness or market potential before full-scale launch.

Urgency

A priority or immediate need that requires swift action or attention.