84.A balance sheet that displays only component percentages is called a
a.
segmented balance sheet.
b.
common-size balance sheet.
c.
condensed balance sheet.
d.
comparative balance sheet.
85.One reason that a common-size statement is a useful tool in financial performance evaluation is that it enables the user to
a.
make better comparisons of two companies of different sizes in the same industry.
b.
determine which companies in a single industry are of the same value.
c.
determine which companies in a single industry are of the same size.
d.
judge the relative potential of two companies of similar size in different industries.
86.Horizontal analysis of comparative financial statements includes the
a.
calculation of the percentage of net sales for each item listed.
b.
calculation of dollar amount changes and percentage changes from the previous to the current year.
c.
development of common-size statements.
d.
calculation of liquidity ratios.
87.In trend analysis, each item is expressed as a percentage of the
a.
total assets amount.
b.
retained earnings amount.
c.
net income amount.
d.
base year amount.
88.In a common-size income statement for a retail store, the 100 percent amount is for
a.
cost of goods sold.
b.
net revenues.
c.
gross profit.
d.
net income.
89.In a common-size balance sheet for a retail store, the 100 percent amount is for
a.
total property, plant, and equipment.
b.
merchandise inventory.
c.
total current assets.
d.
total assets.
90.In a trend analysis, an index number of 139 for 20×7 sales indicates that
a.
sales for 20×7 were 139 percent higher than sales for the same company in the base year.
b.
sales for 20×7 were 139 percent of the sales for the same company in the base year.
c.
actual sales for 20×7 exceeded budgeted sales for 20×7 by 39 percent.
d.
sales for 20×7 for this company were 139 percent of the sales figure of another company being used in the comparison.
91.An example of horizontal analysis is
a.
common-size statements.
b.
trend analysis.
c.
ratio analysis.
d.
profitability analysis.
92.What is the best way to study the relationship of the components of financial statements?
a.
Perform horizontal analysis
b.
Perform ratio analysis
c.
Prepare common-size statements
d.
Perform trend analysis
93.In conducting horizontal analysis, it is important to focus attention on the changes in
a.
the rate of inflation.
b.
the composition of the statements.
c.
dollar amounts and their percentages.
d.
the accounting methods employed.
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