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the statement is false. 1. Financial statements are useless to a person who does not know how to interpret the information contained in the report. 2. When making business decisions, an entrepreneur will need various sources of information. A major source of information is financial statements. 3. A comparison of the information from one period to another is called vertical analysis. 4. An analysis of the interrelationships of information in a single period, expressed as percentages of a common denominator is called horizontal analysis. 5. Entity A reported inventory balances of P100 and P50 in 2020 and 2021, respectively. In a horizontal analysis, a financial statement user would conclude that Entity A's inventory has increased by 50% from 2020 to 2021. 6. In 2020, Entity A reported sales of P100 and profit of P20. In a vertical analysis, a financial statements user would conclude that Entity A was able to generate 20% profit from every peso of its sales during the period. 7. At the beginning of the day, you have P20 cash in your pocket. At the end of the day, you have P5 left. If you make a horizontal analysis of your pocket, you will conclude that your cash has decreased by 80% during the day. 8. In a vertical analysis, you would conclude that out of your total allowance, 40% is spent om snacks. Fact pattern: 11

the statement is false. 1. Financial statements are useless to a person who does not know how to interpret the information contained in the report. 2. When making business decisions, an entrepreneur will need various sources of information. A major source of information is financial statements. 3. A comparison of the information from one period to another is called vertical analysis. 4. An analysis of the interrelationships of information in a single period, expressed as percentages of a common denominator is called horizontal analysis. 5. Entity A reported inventory balances of P100 and P50 in 2020 and 2021, respectively. In a horizontal analysis, a financial statement user would conclude that Entity A's inventory has increased by 50% from 2020 to 2021. 6. In 2020, Entity A reported sales of P100 and profit of P20. In a vertical analysis, a financial statements user would conclude that Entity A was able to generate 20% profit from every peso of its sales during the period. 7. At the beginning of the day, you have P20 cash in your pocket. At the end of the day, you have P5 left. If you make a horizontal analysis of your pocket, you will conclude that your cash has decreased by 80% during the day. 8. In a vertical analysis, you would conclude that out of your total allowance, 40% is spent om snacks. Fact pattern: 11

Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter2: Financial Statements And The Annual Report
Section: Chapter Questions
Problem 2.1E
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Answer 4,5,6
Direction: Answer the following statement, write T if the statement is true and F if the statement is false. 1. Financial statements are useless to a person who does not know how to interpret the information contained in the report. 2. When making business decisions, an entrepreneur will need various sources of information. A major source of information is financial statements. 3. A comparison of the information from one period to another is called vertical analysis. 4. An analysis of the interrelationships of information in a single period, expressed as percentages of a common denominator is called horizontal analysis. 5. Entity A reported inventory balances of P100 and P50 in 2020 and 2021, respectively. In a horizontal analysis, a financial statement user would conclude that Entity A's inventory has increased by 50% from 2020 to 2021. 6. In 2020, Entity A reported sales of P100 and profit of P20. In a vertical analysis, a financial statements user would conclude that Entity A was able to generate 20% profit from every peso of its sales during the period. 7. At the beginning of the day, you have P20 cash in your pocket. At the end of the day, you have P5 left. If you make a horizontal analysis of your pocket, you will conclude that your cash has decreased by 80% during the day. 8. In a vertical analysis, you would conclude that out of your total allowance, 40% is spent om snacks. Fact pattern: 11 Your Papa gave you' an allowance of P10, good for one week. By the end of the week, you have P2 left. The following were your expenditures during weeks: Transportation - P4 Snacks - P3 Text (cellphone load)- P 1 9. In a vertical analysis, you would conclude that out of your total allowance you spent 80% back the P2 excess allowance to Papa. 10. You will give back the P2 excess allowances to Papa.
Transcribed Image Text:Direction: Answer the following statement, write T if the statement is true and F if the statement is false. 1. Financial statements are useless to a person who does not know how to interpret the information contained in the report. 2. When making business decisions, an entrepreneur will need various sources of information. A major source of information is financial statements. 3. A comparison of the information from one period to another is called vertical analysis. 4. An analysis of the interrelationships of information in a single period, expressed as percentages of a common denominator is called horizontal analysis. 5. Entity A reported inventory balances of P100 and P50 in 2020 and 2021, respectively. In a horizontal analysis, a financial statement user would conclude that Entity A's inventory has increased by 50% from 2020 to 2021. 6. In 2020, Entity A reported sales of P100 and profit of P20. In a vertical analysis, a financial statements user would conclude that Entity A was able to generate 20% profit from every peso of its sales during the period. 7. At the beginning of the day, you have P20 cash in your pocket. At the end of the day, you have P5 left. If you make a horizontal analysis of your pocket, you will conclude that your cash has decreased by 80% during the day. 8. In a vertical analysis, you would conclude that out of your total allowance, 40% is spent om snacks. Fact pattern: 11 Your Papa gave you' an allowance of P10, good for one week. By the end of the week, you have P2 left. The following were your expenditures during weeks: Transportation - P4 Snacks - P3 Text (cellphone load)- P 1 9. In a vertical analysis, you would conclude that out of your total allowance you spent 80% back the P2 excess allowance to Papa. 10. You will give back the P2 excess allowances to Papa.
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