EBK PRINCIPLES OF MANAGERIAL FINANCE
14th Edition
ISBN: 8220100666759
Author: ZUTTER
Publisher: PEARSON
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Question
Chapter 3.2, Problem 3.8RQ
Summary Introduction
To discuss:
The reason for comparing the ratios calculated utilising financial statements that are dated during same point of time for the year.
Introduction:
Cross sectional ratio analysis is a tool of financial analysis that compares the similar financial analysis ratios for firms within a same industry at same point of time. It is the preferable mode of comparison of financial analysis.
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Students have asked these similar questions
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When a balance sheet amount is related to an income statement amount in comparing a ratio
a. The ratio losses its historical perspective because at the beginning of the year amount is combined with an end of the year amount.
b. The income statement amount should be converted to an average for the year.
c. Comparisons should be converted to market value
d. The balance sheet amount should be converted to an average for the year.
Explain why the comparison of financial ratios may be more meaningful than thecomparison of figures straight from the financial statements
Explain the meaning of the Accounting Period Assumption. Why the Accounting Period Assumption is important when analysing ratios.
Chapter 3 Solutions
EBK PRINCIPLES OF MANAGERIAL FINANCE
Ch. 3.1 - Prob. 1FOECh. 3.1 - Prob. 2FOECh. 3.1 - Prob. 3.1RQCh. 3.1 - Describe the purpose of each of the four major...Ch. 3.1 - Prob. 3.3RQCh. 3.1 - Prob. 3.4RQCh. 3.2 - With regard to financial ratio analysis, how do...Ch. 3.2 - What is the difference between cross-sectional and...Ch. 3.2 - Prob. 3.7RQCh. 3.2 - Prob. 3.8RQ
Ch. 3.3 - Under what circumstances would the current ratio...Ch. 3.3 - In Table 3.5, most of the specific firms listed...Ch. 3.4 - To assess the firms average collection period and...Ch. 3.5 - What is financial leverage?Ch. 3.5 - What ratio measures the firms degree of...Ch. 3.6 - What three ratios of profitability appear on a...Ch. 3.6 - Prob. 3.15RQCh. 3.6 - Prob. 3.16RQCh. 3.7 - Prob. 3.17RQCh. 3.8 - Financial ratio analysis is often divided into...Ch. 3.8 - Prob. 3.19RQCh. 3.8 - What three areas of analysis are combined in the...Ch. 3 - Prob. 1ORCh. 3 - Learning Goals 3, 4, 5 ST3-1 Ratio formulas and...Ch. 3 - Prob. 3.2STPCh. 3 - Prob. 3.1WUECh. 3 - Learning Goal 1 E3-2 Explain why the income...Ch. 3 - Prob. 3.3WUECh. 3 - Prob. 3.4WUECh. 3 - Learning Goal 6 E3-5 If we know that a firm has a...Ch. 3 - Financial statement account identification Mark...Ch. 3 - Prob. 3.3PCh. 3 - Prob. 3.4PCh. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Prob. 3.8PCh. 3 - Prob. 3.9PCh. 3 - Prob. 3.10PCh. 3 - Prob. 3.11PCh. 3 - Learning Goals 2, 3, 4, 5 P3-10 Ratio comparisons...Ch. 3 - Prob. 3.13PCh. 3 - Prob. 3.14PCh. 3 - Accounts receivable management The table below...Ch. 3 - Prob. 3.18PCh. 3 - Prob. 3.20PCh. 3 - The relationship between financial leverage and...Ch. 3 - Prob. 3.22PCh. 3 - Prob. 3.23PCh. 3 - Prob. 3.24PCh. 3 - Prob. 3.25PCh. 3 - Prob. 3.27PCh. 3 - Prob. 1SE
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Similar questions
- A comparison of the amounts for the same item in financial statements of two or more periods is called:arrow_forwardExplain why ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.arrow_forwardWhat are the main ratios used to analyze financial statements?arrow_forward
- Discuss the tendency of ratios to fluctuate over time (which may or may not beproblematic), explain how they can be influenced by accounting practices aswell as other factors, and explain why they must be used with care.arrow_forwardHorizontal analysis is a technique for evaluating financial statement dataa. for one period of timeb. over a period of timec. on a certain dated. as it may appear in the futurearrow_forwardWhy is it advantageous to use comparative financial statements to analyze a company's performance rather than a single date? Select five ratios, describe how each is calculated and what information it providesarrow_forward
- 1 Horizontal Analysis of financial statements specifically looks at the increases and decreases in the amount, or percentage, of a given item from year to year. True Falsearrow_forwardHorizontal analysis : a. Is a technique for evaluating a series of financial statement data over a period of time. b. Is also known as trend analysis c. Is used to determine the increase or decrease that has taken place. d. Is expressed as either an amount or a percentage. e. All of the above.arrow_forwardWhen a change in accounting principle is made during the year, the cumulative effect on retained earnings is determined: a. during the year using the weighted average method b. as of the date of the change c. as of the beginning of the year in which the change is made d. as of the end of the year in which the change is madearrow_forward
- What do the following data, taken from a comparative balance sheet, indicate about the companys ability to borrow additional long-term debt in the current year as compared to the preceding year?arrow_forwardWhen performing a horizontal analysis on an income statement, the percentage change inany individual item is calculated by dividing the dollar amount of the change from the baseperiod to the current period bya. the base period amount.b. the current period amount.c. the amount estimated for the future period.d. the average of the base and the current period amounts.arrow_forwardis the statement which indicates the relationship of different items of financial statement with some common item by expressing each item as a percentage of such common item a. Comparative statement b. Ratio statement c. Common size statement d. Trend Analysisarrow_forward
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