Match (by letter) the following items with the description or example that best fits. Each letter is used only once.
Items
_____________ 1. Vertical analysis.
_____________ 2. Horizontal analysis.
_____________ 3. Liquidity.
_____________ 4. Solvency.
_____________ 5. Discontinued operation.
_____________ 6. Extraordinary item.
_____________ 7. Quality of earnings.
_____________ 8. Conservative accounting practices.
Descriptions
a. A company’s ability to pay its current liabilities.
b. Accounting choices that result in reporting lower income, lower assets, and higher liabilities.
c. A profit or loss unusual in nature and infrequent in occurrence.
d. The ability of reported earnings to reflect the company’s true earnings as well as the usefulness of reported earnings to help investors predict future earnings.
e. A tool to analyze trends in financial statement data for a single company over time.
f. The sale or disposal of a significant component of a company’s operations.
g. A means to express each item in a financial statement as a percentage of a base amount.
h. A company’s ability to pay its long-term liabilities.