Indicate whether each of the following statements about financial statement analysis is true or false.Ratio analysis may involve studying relationships between an item reported on the balance sheet and another reported on the income statement. ______Comparing sales in Year 2 with sales for Year 1 is a form of vertical analysis. ______Comparing net income in Year 2 with sales for Year 2 is a form of horizontal analysis. ______Liquidity ratios measure a company's ability to generate cash flows in the short term. ______Working capital is calculated by using the following formula: current assets - current liabilities. ______
What will be an ideal response?
Ratio analysis may involve studying relationships between an item reported on the balance sheet and another reported on the income statement. T
Comparing sales in Year 2 with sales for Year 1 is a form of vertical analysis. F
Comparing net income in Year 2 with sales for Year 2 is a form of horizontal analysis. F
Liquidity ratios measure a company's ability to generate cash flows in the short term. T
Working capital is calculated by using the following formula: current assets - current liabilities. T
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