TRUE OR FALSE Horizontal analysis is possible for both an income statement and a statement of financial position. Financial analysis is primarily a matter of making relevant mechanical computations. It is possible that a decrease in gross profit rate may be offset by a decrease in expenses, thus resulting in an increase in net income. On a, common-size income statement, net income is given an equivalent of 100% Short-term creditors generally are more concerned with vertical analysis than with horizontal analysis. Percentage changes are usually computed by using the latest figure as a base. Industry standards tend to place the performance of a company in a more meaningful perspective. The peso amount of change during an accounting period for an item appearing in financial statements is less significant than the change measured as a percentage. An increase in sales volume generally is accompanied by a proportionate increase in net income. Common-size financial statements show peso change in specific items from one year to the next. The peso amount of a change during a period in a certain item appearing in financial statements is probably less significant than the change measured as a percentage. Percentage changes usually are computed by use of the amounts for the latest accounting period as a base. A business enterprise's earnings performance and its financial condition are the two primary concerns of the financial analys

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 24CYBK

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TRUE OR FALSE

Horizontal analysis is possible for both an income statement and a statement of financial position.
Financial analysis is primarily a matter of making relevant mechanical computations.
It is possible that a decrease in gross profit rate may be offset by a decrease in expenses, thus resulting in an increase in net income.
On a, common-size income statement, net income is given an equivalent of 100%
Short-term creditors generally are more concerned with vertical analysis than with horizontal analysis.
Percentage changes are usually computed by using the latest figure as a base.
Industry standards tend to place the performance of a company in a more meaningful perspective.
The peso amount of change during an accounting period for an item appearing in financial statements is less significant than the change measured as a percentage.
An increase in sales volume generally is accompanied by a proportionate increase in net income.
Common-size financial statements show peso change in specific items from one year to the next.
The peso amount of a change during a period in a certain item appearing in financial statements is probably less significant than the change measured as a percentage.
Percentage changes usually are computed by use of the amounts for the latest accounting period as a base.
A business enterprise's earnings performance and its financial condition are the two primary concerns of the financial analyst.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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