TRUE OR FALSE Choose the correct answer. Financial statement analysis uses 1 punto computational and analytical techniques to evaluate the company's risks, performance, financial health, and future prospects with the objective of making economic decisions. * True False Horizontal analysis is the financial 1 punto analysis technique that compares the balances of two accounts in one reporting period. * True False Horizontal analysis can be performed 1 punto with the Statement of Financial Position and the Statement of Comprehensive Income. * True False Vertical analysis compares balances of one account over different periods. * True False A common-size Statement of Financial Position presents accounts expressed as a percentage of total liabilities and equity. * True False U 1 punto 1 punto A common-size Statement of Comprehensive Income presents accounts expressed as a percentage of net income. * 1 punto True False 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. True False 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. * True False 1 punto 1 punto Vertical analysis involves comparing each figure in the financial statements with a corresponding figure of the previous year. * True False The statement of financial position and balance sheet are synonyms. True False 1 punto U 1 punto * Financial statement analysis uses 1 punto computational and analytical techniques to evaluate the company's risk, performance, financial health, and future prospects with the objective of making economic decisions. * True False Return on asset is an operational efficiency ratio. * 1 punto True False Profitability ratios measures the ability of the company's assets to generate sales. * True False Gross profit margin provides an indication of the company's average pricing policy. * True False 1 punto 1 punto 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. * True False Using another company as benchmark, the company with higher net profit margin is more profitable. * True False Accounts receivable turnover measures the number of days in the company's average collections period. * True False 1 punto 1 punto 1 punto U All turnover ratios discussed in this chapter uses the net sales figure as numerator. * True False Debt to equity ratio measures the percentage of assets financed by equity. * True False Quick ratio is stricter than current ratio. * True False punto 1 punto 1 punto