TRUE OR FALSE

1. A common-size Statement of Financial Position presents accounts expressed as a percentage of total liabilities and equity. *

2. A common-size Statement of Comprehensive Income presents accounts expressed as a percentage of net income. * 3. A common-size Statement of Comprehensive Income that shows cost of goods sold at 45% means that cost of goods sold is 45% of sales. * 4. The common-size Statement of Comprehensive Income of Company A and Company B shows net income at 10% and 8% respectively, Company A is more profitable than Company B. * 5. Vertical analysis involves comparing each figure in the financial statements with a corresponding figure of the previous year. * 6. The statement of financial position and balance sheet are synonyms. * 7. Financial statement analysis uses computational and analytical techniques to evaluate the companys risk, performance, financial health, and future prospects with the objective of making economic decisions. * 8. Return on asset is an operational efficiency ratio. * 9. Profitability ratios measures the ability of the companys assets to generate sales. * 10. Gross profit margin provides an indication of the companys average pricing policy. * 11. Given equal gross profit margin, the company with the lower operating income margin has higher operating expenses as a percentage of sales and has leaner operations. * 12. Using another company as benchmark, the company with higher net profit margin is more profitable.