Indicate Whether Each of the Following Statements About Financial Statement

question 109

Short Answer

Indicate whether each of the following statements about financial statement analysis is true or false.
_____ a)A common size income statement is prepared by converting each component to a percentage of net income.
_____ b)Common size financial statements are a form of vertical analysis,but the common size statements for two or more years may usefully be compared.
_____ c)Vertical analysis of a balance sheet involves converting each component to a percentage of stockholders' equity.
_____ d)Small percentage changes resulting from vertical analysis may still represent large dollar amounts;therefore,changes in both absolute dollar amounts and percentages should be examined.
_____ e)Vertical analysis of a company's balance sheet is useful in assessing its liquidity.

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Definitions:

Maximized Government Participation

A policy or approach where the government actively engages in various sectors of the economy, often including owning or regulating businesses and industries.

Private Enterprise System

An economic system where private individuals or businesses own the means of production and operate for profit, often characterized by competition and market forces.

Entrepreneurs

People who establish, manage, and run companies while accepting higher-than-usual financial risks in the process.