Financial Statement Analysis

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MODULE 10 FINANCIAL STATEMENT ANALYSIS THEORIES: 6. Management is a user of financial analysis. Which of the following comments does not represent a fair statement as to the management perspective? A. Management is always interested in maximum profitability. B. Management is interested in the view of investors. C. Management is interested in the financial structure of the entity. D. Management is interested in the asset structure of the entity. Limitations 1. A limitation in calculating ratios in financial statement analysis is that A. it requires a calculator. B. no one other than the management would be interested in them. C. some account balances may reflect atypical data at year end. D. they…show more content…
vertical analysis C. profitability analysis B. solvency analysis D. horizontal analysis 11. Horizontal analysis is also known as A. linear analysis. C. trend analysis. B. vertical analysis. D. common size analysis. 13. In which of the following cases may a percentage change be computed? A. The trend of the amounts is decreasing but all amounts are positive. B. There is no amount in the base year. C. There is a negative amount in the base year and a negative amount in the subsequent year. D. There is a negative amount in the base year and a positive amount in the subsequent year. 14. Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time A. that has been arranged from the highest number to the lowest number. B. that has been arranged from the lowest number to the highest number. C. to determine which items are in error. D. to determine the amount and/or percentage increase or decrease that has taken place. Trend analysis 16. Trend analysis allows a firm to compare its performance to: A. other firms in the industry C. other industries B. other time periods within the firm D. none of the above Risk and return 29. The present and prospective stockholders are primarily concerned with a firm’ A. profitability C. leverage B. liquidity D. risk and
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