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:

European Trading Organizations

Consortia or groups in Europe that facilitate trade, such as the European Free Trade Association, aiming to promote economic cooperation and reduce trade barriers.

Modern Corporation

Contemporary business entities characterized by limited liability for its owners, perpetual succession, and centralized management, often operating on a large scale.

Limited Liability

A legal structure that protects owners' personal assets from business debts and liabilities.

Inheritance Laws

Legal statutes and regulations governing the distribution of a deceased person’s estate to their heirs and beneficiaries.