ACCT 210 Chpt.12 Questions and Answers | July Update

ACCT 210 Chpt.12
Questions and Answers | July Update
A vertical analysis is best used to make comparisons between multiple companies. **
Answ** True

In vertical analysis of the income statement, we usually express each income statement
item as a percentage of: ** Answ** Sales

Provided below is summary income statement data for Freedom Corporation.
Amount
Sales $800,000
Cost of goods sold 350,000
Operating expenses 180,000
Other expense 30,000
Income tax expense 20,000
Net income $220,000

Using vertical analysis, what percentage is applicable to Cost of Goods Sold? **
Answ** 43.8%

In vertical analysis of the balance sheet, we usually express each balance sheet item as
a percentage of: ** Answ** Total assets

Provided below is a partial balance sheet for Goodwin Corporation.
Amount
Cash $500,000
Accounts receivable 400,000
Inventory 300,000
Long-term assets 900,000
Total assets $2,100,000

Using vertical analysis, what percentage is applicable to Inventory? ** Answ**
14.3%

We use horizontal analysis to _____. ** Answ** analyze trends in financial
statement data for a company over time

Which of the following is the denominator in the formula used to calculate the
percentage increase or decrease of an item in horizontal analysis? ** Answ** Prior-
year amount