Chapter 17—Financial Statement Analysis

TRUE/FALSE

1. Comparable financial statements are designed to compare the financial

statements of two or more corporations.

ANS: F PTS: 1 DIF: Easy OBJ: 17-01

NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-
23-Financial Statement Analysis

2. In horizontal analysis, the current year is the base year.

ANS: F PTS: 1 DIF: Easy OBJ: 17-01

NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-
23-Financial Statement Analysis

3. On a common-sized income statement, all items are stated as a percent of

total assets or equities at year-end.

ANS: F PTS: 1 DIF: Easy OBJ: 17-01

NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-
23-Financial Statement Analysis

4. The percentage analysis of increases and decreases in corresponding

items in comparative financial statements is referred to as horizontal
analysis.

ANS: T PTS: 1 DIF: Easy OBJ: 17-01

NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-
23-Financial Statement Analysis

5. A 15% change in sales will result in a 15% change in net income.

ANS: F PTS: 1 DIF: Easy OBJ: 17-01

NAT: AACSB Analytic | AICPA FN-Measurement | ACBSP-APC-
23-Financial Statement Analysis