Question 1

Trend analysis using income statement data is widely used for predicting the future.

Accepted Answer

Trend analysis is a common method of analyzing financial statements to identify patterns and predict future financial performance, including income statement data.

Question 2

If a company has sales of $150 in 2016 and $225 in 2017, the percentage change from 2016 to 2017 is 50%.

Accepted Answer

The percentage change is calculated as ((225 - 150) / 150) * 100 = 50%.

Question 3

The primary focus of horizontal analysis is:
A)percentage changes in line items from comparative financial statements.
B)the balance sheet only.
C)the amount of individual financial statement line items as a percentage of some related total, such as total assets.
D)the income statement only.

Accepted Answer

The primary focus of horizontal analysis is to compare percentage changes in line items from comparative financial statements. This allows for the analysis of trends and changes over time in the financial performance of a company.

Question 4

Zemanowski Company reports the following sales figures(in millions):  What is the trend percentage in 2015 if 2013 is the base year? (Round your final answer to the nearest whole percentage, X%)
A)110%
B)103%
C)105%
D)107%

Accepted Answer

The answer of Zemanowski Company reports the following sales figures(in...

Question 5

For investment analysis, it is generally considered more useful to calculate the percentage changes in the dollar amounts of financial statement line items from year to year instead of using the absolute dollar amounts.

Accepted Answer

Percentage changes provide a clearer picture of growth or decline relative to the size of the line item, allowing for better comparison across different periods or companies.

Question 6

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

Accepted Answer

Horizontal analysis involves comparing the same line item in the current year's financial statement with the corresponding line item in the prior year's financial statement. This allows for the identification of changes and trends over time.

Question 7

If a company has sales of $250 in 2017 and $225 in 2018, the percentage decrease from 2017 to 2018 is 10%.

Accepted Answer

The percentage decrease is calculated as ((250 - 225) / 250) * 100 = 10%.

Question 8

The percentage change in any individual item shown on comparative financial statements is calculated by dividing the dollar amount of the change from the base period to the current period by:
A)the amount shown for the current period.
B)the base-period amount.
C)the average of the amounts shown for the base and the current periods.
D)the amount estimated for the future period.

Accepted Answer

To calculate the percentage change in a single item on comparative financial statements, you need to compare the base period amount with the current period amount. Therefore, you should divide the dollar amount of the change by the base-period amount, which is used as the denominator in the formula. Dividing by the amount shown for the current period (choice A), the average of the amounts shown for the base and current periods (choice C), or the amount estimated for the future period (choice D) would not give an accurate percentage change calculation.

Question 9

Year to year percentage changes in line items from comparative financial statements is called:
A)benchmarking.
B)horizontal analysis.
C)vertical analysis.
D)common-size financial statements.

Accepted Answer

Year to year percentage changes in line items from comparative financial statements is called horizontal analysis. Benchmarking involves comparing a company's performance to others in the industry, vertical analysis involves analyzing how much each line item contributes to the total revenue or expenses, and common-size financial statements involve expressing each line item as a percentage of a base amount (usually total assets or total revenue).

Question 10

Zebra Company reports the following figures for the years ending December 31, 2017 and 2016:  What are the percentage changes from 2016 to 2017 for Net Sales, Cost of Goods Sold and Gross Profit, respectively? (Round your final answers to one decimal place, X.X%)
A)100%, 162.5%, 10.8%
B)100%, 0.9%, 0.4%
C)162.5%, 37.8%, 10.8%
D)37.8%, 10.8%, 162.5%

Accepted Answer

The answer of Zebra Company reports the following figures for...

Question 11

The percentage change in a financial statement line item over two years is computed by dividing the dollar amount of the line item in the most recent year by the prior year dollar amount of the line item.

Accepted Answer

The percentage change in a financial statement line item over two years is computed by subtracting the prior year dollar amount from the most recent year dollar amount, dividing the result by the prior year dollar amount, and then multiplying by 100 to express the result as a percentage.

Question 12

Horizontal analysis highlights changes in financial statement line items over time and provides a complete picture of a business.

Accepted Answer

The answer of Horizontal analysis highlights changes in financial statement...

Question 13

For the period from 2017 to 2018, a company reports the following:  If sales are $7,000,000 in 2017, what are sales in 2018?
A)$2,800,000
B)$7,000,000
C)$9,450,000
D)$9,800,000

Accepted Answer

The answer of For the period from 2017 to 2018,...

Question 14

The formula for the percentage change in a financial statement line item is the current year amount:
A)divided by the base year amount.
B)minus the base year amount divided by the base year amount.
C)minus the base year amount divided by current year amount.
D)added to the base year amount divided by the base year amount.

Accepted Answer

The formula for percentage change is [(Current year amount - Base year amount) / Base year amount] × 100. Option B is the closest to this formula.

Question 15

A type of analysis that indicates the direction a business is taking is:
A)benchmarking.
B)economic value added analysis.
C)vertical analysis.
D)trend percentages.

Accepted Answer

Trend percentages analyze financial data over a period of time to identify patterns and indicate the direction a business is taking.

Question 16

Horizontal analysis is most closely related to:
A)trend analysis.
B)economic value added analysis.
C)vertical analysis.
D)benchmarking.

Accepted Answer

Horizontal analysis involves comparing financial data over multiple periods to identify trends and changes, which is the essence of trend analysis.

Question 17

How is the trend percentage for sales in 2017 computed? The base year is 2012.
A)Year 2017 sales ÷ Year 2012 sales
B)(Year 2017 sales - Year 2012 sales)÷ Year 2012 sales
C)(Year 2017 sales - Year 2012 sales)÷ Year 2017 sales
D)(Year 2017 sales ÷ Year 2012 sales)× 100

Accepted Answer

The trend percentage is calculated by dividing the sales of the year in question by the sales of the base year and then multiplying by 100 to convert it to a percentage.

Question 18

When computing trend percentages:
A)the current year is always equal to 100%.
B)the base year is always the latest year.
C)the base year is always equal to 100%.
D)the base year is equal to the current year plus the previous year divided by two.

Accepted Answer

In trend percentages, the base year is always set to 100%, and subsequent years are compared to this base year to determine the trend.

Question 19

Nekich Company reports the following sales figures(in millions):  What is the trend percentage in 2018 if 2013 is the base year? (Round your final answer to the nearest whole percentage, X%)
A)92%
B)88%
C)85%
D)95%

Accepted Answer

The answer of Nekich Company reports the following sales figures(in...

Question 20

Trend percentages are a form of horizontal analysis that are computed only for balance sheet items.

Accepted Answer

Trend percentages can be computed for both balance sheet and income statement items, not just for balance sheet items. They are used to analyze trends over multiple periods for a single account.

Quiz 13: Financial Statement Analysis

Trend analysis using income statement data is widely used for predicting the future.

If a company has sales of $150 in 2016 and $225 in 2017, the percentage change from 2016 to 2017 is 50%.

The primary focus of horizontal analysis is:

Zemanowski Company reports the following sales figures(in millions) : What is the trend percentage in 2015 if 2013 is the base year? (Round your final answer to the nearest whole percentage, X%)

For investment analysis, it is generally considered more useful to calculate the percentage changes in the dollar amounts of financial statement line items from year to year instead of using the absolute dollar amounts.

Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year.

If a company has sales of $250 in 2017 and $225 in 2018, the percentage decrease from 2017 to 2018 is 10%.

The percentage change in any individual item shown on comparative financial statements is calculated by dividing the dollar amount of the change from the base period to the current period by:

Year to year percentage changes in line items from comparative financial statements is called:

Zebra Company reports the following figures for the years ending December 31, 2017 and 2016: What are the percentage changes from 2016 to 2017 for Net Sales, Cost of Goods Sold and Gross Profit, respectively? (Round your final answers to one decimal place, X.X%)

The percentage change in a financial statement line item over two years is computed by dividing the dollar amount of the line item in the most recent year by the prior year dollar amount of the line item.

Horizontal analysis highlights changes in financial statement line items over time and provides a complete picture of a business.

For the period from 2017 to 2018, a company reports the following: If sales are $7,000,000 in 2017, what are sales in 2018?

The formula for the percentage change in a financial statement line item is the current year amount:

A type of analysis that indicates the direction a business is taking is:

Horizontal analysis is most closely related to:

How is the trend percentage for sales in 2017 computed? The base year is 2012.

When computing trend percentages:

Nekich Company reports the following sales figures(in millions) : What is the trend percentage in 2018 if 2013 is the base year? (Round your final answer to the nearest whole percentage, X%)

Trend percentages are a form of horizontal analysis that are computed only for balance sheet items.