Which of the following statements about financial statement analysis is not true?
A)In horizontal percentage analysis,an item from the financial statements is expressed as a percentage of the same item from a previous year's financial statements.
B)Vertical analysis compares two or more financial statement items within the same time period.
C)Horizontal analysis for several years can be done by choosing one year as a base year and calculating increases or decreases in relation to that year.
D)The reason behind a financial statement ratio or percentage analysis result is usually self-evident and does not require further study or analysis.

Question

Quizplus · Accepted Answer

Whether basing their analyses on absolute amounts,percentages,or ratios,users must avoid drawing overly simplistic conclusions about the reasons for the results.Numerical relationships flag conditions requiring further study.Recall that a change that appears favorable on the surface may not necessarily be a good sign.Users must evaluate the underlying reasons for the change.In other words,the reason behind a financial statement ratio or percentage analysis result is not usually self-evident and,as such,it does require further study or analysis.

Which of the Following Statements About Financial Statement Analysis Is