Financial Statement Analysis

SECTION A: Multiple Choice. Instruction - Select the right choice and record your answers in the Answer Sheet Provided. 1. Which equation represents an income statement? a. Assets = liabilities + stockholders' equity. b. Cash in-cash out-net income c. Cash revenues expenses- net income. d. None of the above. 2. Which of the following is an acceptable method to report total comprehensive income? a. In the statement of stockholders' equity. b. Total comprehensive income does not have to be reported c. In the operating section of the cash flow statement. d. On the face of the balance sheet. 3. How is a common-size income statement prepared? a. Each income statement item is expressed as a percentage of total assets. b. Each income statement item is expressed as a percentage of total expenses. c. Each income statement item is expressed as a percentage of net income. d. Each income statement item is expresed as a percentage of net sales. 4. How are sales reported on the income statement? a. Sales are shown for two years net of returns and allowances. b. Sales amounts are inflation-adjusted. c. Sales are shown for hwe years and are reported in nominal terms. d. Sales are shown for tweo years net of returns and discounts. thiee 5. Which of the following statements is true? year to year the two percentages add up to 100%. a. In stable industries, such as retailers, the gross profit margin is generally volatile from b. Gross profit margin and cost of goods percentage are complements of each other and c. Variable costs do not vary proportionately with volume changes but remain the same within a relevant range of activity