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