Module 4: Analyzing Financial
Statements Exam Questions &
Answers (Grade A+)
Financial Statement Analysis -
correct answer ✅The examination of both the relationships
among financial statement numbers and the trends in those
numbers over time.
Common-Size Financial Statements -
correct answer ✅Involves dividing one number by another
number to get a percentage. The percentage is used for
comparison.
Horizontal Analysis -
correct answer ✅A method of comparing numbers across the
financial statements across time for the same company.
Vertical Analysis -
correct answer ✅A method of comparing companies at the same
point in time but looking at different components of the financial
statements.
What is the Equation for calculating Horizontal Analysis? -
correct answer ✅(Year 2 - Year 1)/Year 1 = 1 the percentage
, Module 4: Analyzing Financial
Statements Exam Questions &
Answers (Grade A+)
change from year to year. The analysis is looking for LARGE
percentage changes and directional changes compared to sales.
What is the definition of financial statement analysis? -
correct answer ✅Examining both the relationships among
financial statement numbers and the trends in those numbers over
time
How is a common-size income statement created? -
correct answer ✅By dividing all income statement amounts for a
given year by sales for that year
What is the purpose of performing horizontal analysis of financial
statements? -
correct answer ✅To highlight trends that may be occurring in the
company over time
Vertical Analysis Across Companies in the same industries -
correct answer ✅A method of financial statement analysis in
which each line item is displayed as a percentage of another item to
allow for comparison to other companies within the same industry
at the same point in time.
Statements Exam Questions &
Answers (Grade A+)
Financial Statement Analysis -
correct answer ✅The examination of both the relationships
among financial statement numbers and the trends in those
numbers over time.
Common-Size Financial Statements -
correct answer ✅Involves dividing one number by another
number to get a percentage. The percentage is used for
comparison.
Horizontal Analysis -
correct answer ✅A method of comparing numbers across the
financial statements across time for the same company.
Vertical Analysis -
correct answer ✅A method of comparing companies at the same
point in time but looking at different components of the financial
statements.
What is the Equation for calculating Horizontal Analysis? -
correct answer ✅(Year 2 - Year 1)/Year 1 = 1 the percentage
, Module 4: Analyzing Financial
Statements Exam Questions &
Answers (Grade A+)
change from year to year. The analysis is looking for LARGE
percentage changes and directional changes compared to sales.
What is the definition of financial statement analysis? -
correct answer ✅Examining both the relationships among
financial statement numbers and the trends in those numbers over
time
How is a common-size income statement created? -
correct answer ✅By dividing all income statement amounts for a
given year by sales for that year
What is the purpose of performing horizontal analysis of financial
statements? -
correct answer ✅To highlight trends that may be occurring in the
company over time
Vertical Analysis Across Companies in the same industries -
correct answer ✅A method of financial statement analysis in
which each line item is displayed as a percentage of another item to
allow for comparison to other companies within the same industry
at the same point in time.
