Indicate Whether Each of the Following Statements About Financial Statement

question 45

Short Answer

Indicate whether each of the following statements about financial statement analysis is true or false.
_____ a) Ratio analysis may involve studying relationships between an item reported on the balance sheet and another reported on the income statement.
_____ b) Comparing sales in 2012 with sales for 2011 is a form of vertical analysis.
_____ c) Comparing net income in 2012 with sales for 2012 is a form of horizontal analysis.
_____ d) Liquidity ratios measure a company's ability to generate profits in the short term.
_____ e) Working capital is calculated by using the following formula: quick assets - current liabilities.

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Definitions:

Expected Frequency

The anticipated count in each category of a contingency table under the assumption that the null hypothesis is true, used in chi-square tests.

Null Hypothesis

The null hypothesis is a statement in statistical analysis that proposes no significant effect or no difference as the outcome of an experiment or study.

Level of Significance

The probability threshold under which the null hypothesis is rejected in hypothesis testing, denoted as alpha.

Null Hypothesis

A default position that there is no difference or effect in a particular situation, used as a starting point for statistical hypothesis testing.