All of the Following Statements Regarding Vertical Analysis Are True

question 150

Multiple Choice

All of the following statements regarding vertical analysis are true except:

• A) Vertical analysis may be prepared for several periods to analyze changes in relationships over time.
• B) In a vertical analysis of a balance sheet, each asset item is stated as a percent of total assets.
• C) In a vertical analysis of an income statement, each item is stated as a percent of total expenses.
• D) Major differences between a company's vertical analysis and industry averages should be investigated.

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Definitions:

Coefficient

In mathematics and statistics, a coefficient is a multiplicative factor in some term of a polynomial, series, or expression; it is usually a number, but in any case does not involve any variables of the series.

Linearly Related

Refers to a correlation between two variables in which a variation in one is linked to a corresponding change in the other.

Interaction Term

In statistical models, a variable created by multiplying two or more variables together to investigate if the effect of one variable on the dependent variable is different at different levels of the other variable.

Coefficient

A numerical constant placed at the beginning and serving as a multiplier to a variable in an algebraic formula.