Indicate Whether Each of the Following Statements About Financial Statement

question 100

Short Answer

Indicate whether each of the following statements about financial statement analysis is true or false.
1. Ratio analysis may involve studying relationships between an item reported on the balance sheet and another reported on the income statement.
2. Comparing sales in 2014 with sales for 2013 is a form of vertical analysis.
3. Comparing net income in 2014 with sales for 2014 is a form of horizontal analysis.
4. Liquidity ratios measure a company's ability to generate cash flows in the short term.
5. Working capital is calculated by using the following formula: current assets - current liabilities.

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Definitions:

Demand Curve

A diagram illustrating the connection between the price of a commodity and the amount of it consumers want over a set period.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that suppliers are willing to sell at different prices, typically upward sloping.

Income

Money received, especially on a regular basis, for work, through investments, or from any other source, used to acquire goods and services.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price over a specific period.