Question: 1 In a horizontal analysis the change in an account

1. In a horizontal analysis, the change in an account balance is expressed as a percentage change compared to:
a. net income.
b. total assets.
c. prior-year account balance.
d. both A and B.
2. Pauley Corp.'s balance in inventory increased from $50,000 to $60,000. A horizontal analysis of inventory would show:
a. a 20.0% increase in inventory.
b. a 12.5% decrease in inventory.
c. a 12.5% increase in inventory.
d. none of the above.
3. A horizontal analysis of sales and cost of goods sold yields the following:
Sales ........ 15.8%
Cost of Goods Sold ... 18.9%
Which of the following best describes these results?
a. The company's cost of sales grew faster than its sales
b. The company's cost of sales fell faster than its sales
c. The company's sales fell slower than its cost of sales
d. None of the above
4. When performing a vertical analysis, which of the following is usually the base amount for accounts payable?
a. Net income
b. Total liabilities
c. Total assets
d. Common stock
5. The following example shows what type of analysis?
a. Horizontal analysis
b. Ratio analysis
c. Vertical analysis
d. Fundamental analysis
6. A financial statement on which a vertical analysis is conducted is often called:
a. a standardized statement.
b. a common-size statement.
c. a same-size statement.
d. none of the above.
7. A vertical analysis can be used to compare different companies because it removes the effects of:
a. accounting techniques.
b. company profitability.
c. company size.
d. none of the above.
8. Profitability ratios usually compare some financial aspect of a company to:
a. current assets.
b. total assets.
c. net income.
d. stock price.
9. Which of the following is not a profitability ratio?
a. Inventory turnover
b. Earnings per share
c. Profit margin
d. Price to earnings
10. Dividing net income by average total assets yields:
a. return on equity.
b. return on assets.
c. profit margin.
d. price to earnings.

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