If an Analyst Wishes to See How a Company's Operating

question 96

Multiple Choice

If an analyst wishes to see how a company's operating expenses as a percentage of net sales have changed from one year to the next, which of the following types of financial statement analysis would be used?

• A) Vertical analysis
• B) Horizontal analysis
• C) Ratio analysis
• D) Common-size financial statement analysis

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Definitions:

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board for global use.

Perpetual

A method of inventory management where updates are made continuously as transactions occur.

Income Summary

An account used during the closing process that summarizes revenues and expenses for a specific accounting period before the net income or loss is transferred to retained earnings.

Inventory

Items meant for sale during regular business operations, currently being produced for that purpose, or intended as materials to be used in manufacturing.