Match each definition that follows with the term (a-h) it defines.
-A percentage analysis of increases and decreases in related items on comparative financial statements
A)Solvency
B)Leverage
C)Times interest earned
D)Horizontal analysis
E)Vertical analysis
F)Common-sized financial statements
G)Current position analysis
H)Profitability analysis

Question

Quizplus · Accepted Answer

Horizontal analysis compares financial data over a period of time to measure changes in an entity's financial condition.

Answer: E
 Vertical analysis compares each item on a financial statement as a percentage of a base amount, typically the net sales on an income statement or total assets on a balance sheet.

Answer: F
 Common-sized financial statements present financial statements in a standardized format making it easier to compare financial data across entities or industries.

Answer: G
 Current position analysis reviews an entity's liquidity, or its ability to meet short-term obligations, through current assets and current liabilities.

Answer: H
 Profitability analysis measures the entity's ability to generate profits, typically measured by return on assets, return on equity or profit margin ratios.

Match Each Definition That Follows with the Term (A-H) It