Indicate Whether Each of the Following Statements About Financial Statement

question 67

Short Answer

Indicate whether each of the following statements about financial statement analysis is true or false.
_____ a) In horizontal percentage analysis, an item from the financial statements is expressed as a percentage of the same item from a previous year's financial statements.
_____ b) The reason behind a financial statement ratio or percentage analysis result is usually self evident and does not require further study or analysis.
_____ c) Horizontal analysis for several years can be done by choosing one year as a base year and calculating increases or decreases in relation to that year.
_____ d) Vertical analysis compares two or more financial statement items within the same time period.
_____ e) One form of horizontal analysis is the preparation of common size financial statements.

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Definitions:

Average Total

typically pertains to the average total cost, which is calculated by dividing the total cost of production by the quantity produced.

Average Fixed

Average Fixed refers to the average fixed costs per unit of output, which decreases as the quantity of output increases because total fixed costs are spread over a larger number of units.

Average Variable

Pertains to the expenses that change in proportion to the activity of a business, averaged per unit of production or operation.

Average Total Cost

The average cost per unit of output, calculated by dividing the total production cost by the number of units produced.