True/False Question On Financial Statement
A common-size income statement usually shows each revenue or expense item as a percentage of net sales
True
A natural business year relates to a fiscal year ending when operations are at their lowest point
True
Average receivables may also be expressed in terms of the number of days' sales in receivables
True
Common size financial statements are a widely used vertical analysis technique
True
Comparability between enterprises is more difficult to obtain than comparability within a single enterprise
True
Computation of ratios for an accounting period is a form of horizontal analysis
True
One form of horizontal analysis is the development of an index- number trend series
True
Return on investment (ROI) is a measure of overall asset productivity
True
The accounts receivable turnover is both a measure of liquidity and a measure of activity
True
The inventory turnover is computed by dividing cost of goods sold by average inventory
True
The price earnings ratio is a measure of the relative attractiveness of common stock as an investment
True
The ratio called profit margin on sales is a measure of the profit percentage per dollar of sales
True
The receivable position and the approximate collection time may be evaluated by computing the accounts receivable turnover
True
Normally a relatively low inventory turnover is desirable
False
Normally, an analyst would believe that a manufacturing company with a current ratio of 3 to 1 was in serious liquidity trouble
False
Some external users of financial statement comprises Inland Revenue, existing shareholders and potential investors
False
The acid test ratio is regarded primarily as a measure of a company's long term liquidity situation
False
The four classification of ratio analysis are liquidity ratio, fixed asset ratio, profitability ratio and efficiency ratios
False
The internal users of financial statement are managers, employees and creditors
False
The ratio of the net sales to total assets is often called the profitability ratio
False
When preparing an index-number trend series, the first year presented must always be the base
False
Development of data that measure changes occurring from one accounting period to another is a form of horizontal analysis
True
Financial statements that reflect financial data for two or more periods are often referred to as comparative statements
True
Generally, the first concern of a financial analyst is a firm's liquidity
True
Horizontal analysis is a technique to compare company's financial condition over a period of time
True
Index numbers can only be computed when amounts are positive
True
The use of borrowed funds is known as trading on the equity
True
The working capital ratio is regarded as fundamental measurement of a company's liquidity
True
Usually quick ratio of 1.5 o 1 would be considered satisfactory
True
Vertical analysis is a technique to evaluate each item in a financial statement as a percent of a base amount or item
True