10 Multiple choice: Horizontal analysis, trend percentage, profitability analysis

Question 1

Which of the following is the definition of horizontal analysis?

a. Horizontal analysis is the study of percentage changes in comparative financial statements.

b. Horizontal analysis is the analysis of a financial statement that reveals the relationship of each statement item to a specified base, which is the 100% figure.

c. Horizontal analysis is the practice of comparing a company with other companies that are leaders.

d. None of the above is a definition of horizontal analysis.

Question 2

Which of the following is the definition of trend percentage analysis?

a. Trend percentage analysis is the analysis of a financial statement that reveals the relationship of each statement item to a specified base, which is the 100% figure.

b. Trend percentage analysis is the practice of comparing a company with other companies that are leaders.

c. Trend percentage analysis is the analysis in which percentages are computed by selecting a base year as 100% and expressing amounts for following years as a percentage of the base amount.

d. Trend percentage analysis is the study of percentage changes in comparative financial statements.

Question 3

Which of the following types of analysis would reveal that sales increased by $20,000 from 2005 to 2006?

a. Capital analysis

b. Vertical analysis

c. Profitability analysis

d. Horizontal analysis

Question 4

Which of the following types of analysis includes trend percentage analysis?

a. Vertical analysis

b. Profitability analysis

c. Horizontal analysis

d. Capital analysis

Question 5

A company reported the following amounts of net income:
2006 $18,000
2007 $24,000
2008 $26,000

Which of the following is the percentage change in net income from 2007 to 2008?

a. 2.00%

b. 10.00%

c. 8.33%

d. 7.69%

Question 6

A company reported the following amounts of net income:

2006 $18,000
2007 $24,000
2008 $26,000

Which of the following is the percentage change in net income from 2006 to 2007?

a. 33.33%

b. 8.33%

c. 10.00%

d. 30.00%

Question 7

What type of analysis is illustrated in the following table?

Account 2007 2006 Change Amount Change Percent
Current assets $130,000 $100,000 $30,000 30.0%
Accounts receivable 114,000 120,000 -6,000 -5.0%

a. The table illustrates capital analysis

b. The table illustrates horizontal analysis

c. The table illustrates ratio analysis.

d. The table illustrates vertical analysis

Question 8

The net income for a company was $630,000 last year and $540,000 this year. The percentage of increase or decrease was from last year to this year is:

a. 14.29%.

b. 16.67%.

c. 7.14%.

d. 8.33%.

Question 9

Which of the following is a common way to evaluate a company's performance?

a. Compare this year's performance of the company to a prior year's performance of the company

b. Compare the company's performance to the performance of a competing company.

c. Compare the company's performance to the industry's performance

d. All of the above are common ways

Question 10

What are the two main ways to analyze financial statements?

a. Benchmarking and horizontal analysis

b. Benchmarking and common-size analysis

c. Common-size analysis and vertical analysis

d. Horizontal analysis and vertical analysis