Louisiana State University, Shreveport

ACCT 701

CHAPTER 17

1)(T / F) Horizontal analysis is the calculation of dollar changes or percentage changes in comparative statement items or totals. Use of this analysis helps detect changes in a company's performance and highlights trends.

2.  (T / F) Vertical analysis consists of a study of a single financial statement in which each item is expressed as a percentage of a significant total.
3.  (T / F) Equity, or long-term solvency, ratios show the relationship between debt and equity financing in a company. These ratios include (1) equity (stockholders' equity) ratio and (2) stockholders' equity to debt ratio.
4.  (T / F) An objective of financial statement analysis is to provide information about the company's past performance and current financial position.
5.  (T / F) Vertical analysis helps detect changes in a company's performance over several periods and highlights trends.
6.  (T / F) Common-size statements provide information about changes in dollar amounts relative to the previous periods.
7.  (T / F) Liquidity ratios show a company's capacity to pay maturing current liabilities.

8. (T / F) Financial statement analysts must be sure that comparable data are used among companies to make the comparisons valid.