1. Which analysis tool determines the percentage of increase or decrease over time? (Points : 4) Vertical analysis Change analysis Horizontal analysis Ratio analysis Ans; Horizontal Analysis determines the percentage of increase or decrease over time. Question 2.2. The company president wants to determine how his company compares to his main competitor. Which analysis tool will his accountant use? (Points : 4) Intracompany comparison Intercompany comparison Ratio comparison Industry comparison Ans : Intercompany comparison is the tool that his accountant will use. Question 3.3. An accountant wants to determine how net income compared to sales last month. Which analysis tool would the accountant use? (Points : 4) Vertical analysis Horizontal analysis Change analysis Linear analysis Ans; The accountant will use the vertical analysis of the last month. Question 4.4. Is there any effect on the percentage of net income to sales if the cost of goods sold increased as a percentage of sales, and operating expenses increased as a percentage of net income? (Points : 4) Yes, it increases Yes, it decreases No, there is no effect There is insufficient data. Ans: COGS as % of sales & Operating expenses as % of net income rises, the Net income has an effect and it decreases. Option 2 is correct. Question 5.5. What is an advantage of vertical analysis? (Points : 4) Allows for the comparison of prior years’ financial data Allows for the analysis of changes in percentages of specific financial statement items Allows for the comparison of large and small companies Allows for the analysis of yearly changes in specific financial statement items Ans : Advantage of vertical analysis is that it Allows for the comparison of large and small companies. Question 6.6. What is another name for common-size analysis? (Points : 4) Ratio analysis Vertical analysis Change analysis Horizontal analysis Ans : Another name of common-size analysis is Vertical analysis. Question 7.7. What does vertical analysis evaluate? (Points : 4) Increases or decreases in financial statement items Comparison with prior year financial data A financial statement item as a percentage of a base amount A financial statement item compared with prior month amount Ans : Vertical analysis evaluates A financial statement item as a percentage of a base amount Question 8.8. When performing vertical analysis on an income statement, what is the base item? (Points : 4) Net income Net sales Gross profit Gross sales Ans ; When performing vertical analysis on an income statement , Net sales is the base amount. Question 9.9. What is the formula for horizontal analysis of changes since the base year? (Points : 4) Current year plus base year amount divided by base year amount Base year amount divided by current year amount plus base year amount Base year divided by current year amount minus base year amount Ans : Formula for Horizontal analysis: Current year minus base year amount divided by base year amount Questio.

1. 1. Which analysis tool determines the percentage of increase or decrease over time? (Points : 4)
Vertical analysis
Change analysis
Horizontal analysis
Ratio analysis
Ans; Horizontal Analysis determines the percentage of increase or decrease over time.
Question 2.2. The company president wants to determine how his company compares to his main
competitor. Which analysis tool will his accountant use? (Points : 4)
Intracompany comparison
Intercompany comparison
Ratio comparison
Industry comparison
Ans : Intercompany comparison is the tool that his accountant will use.
Question 3.3. An accountant wants to determine how net income compared to sales last month.
Which analysis tool would the accountant use? (Points : 4)
Vertical analysis
Horizontal analysis
Change analysis
Linear analysis
Ans; The accountant will use the vertical analysis of the last month.
Question 4.4. Is there any effect on the percentage of net income to sales if the cost of goods sold
increased as a percentage of sales, and operating expenses increased as a percentage of net
income? (Points : 4)
Yes, it increases
Yes, it decreases
No, there is no effect
There is insufficient data.
Ans: COGS as % of sales & Operating expenses as % of net income rises, the Net income has an
effect and it decreases. Option 2 is correct.
Question 5.5. What is an advantage of vertical analysis? (Points : 4)
Allows for the comparison of prior years’ financial data
Allows for the analysis of changes in percentages of specific financial statement items
Allows for the comparison of large and small companies
Allows for the analysis of yearly changes in specific financial statement items
Ans : Advantage of vertical analysis is that it Allows for the comparison of large and small

2. companies.
Question 6.6. What is another name for common-size analysis? (Points : 4)
Ratio analysis
Vertical analysis
Change analysis
Horizontal analysis
Ans : Another name of common-size analysis is Vertical analysis.
Question 7.7. What does vertical analysis evaluate? (Points : 4)
Increases or decreases in financial statement items
Comparison with prior year financial data
A financial statement item as a percentage of a base amount
A financial statement item compared with prior month amount
Ans : Vertical analysis evaluates A financial statement item as a percentage of a base amount
Question 8.8. When performing vertical analysis on an income statement, what is the base item?
(Points : 4)
Net income
Net sales
Gross profit
Gross sales
Ans ; When performing vertical analysis on an income statement , Net sales is the base amount.
Question 9.9. What is the formula for horizontal analysis of changes since the base year? (Points
: 4)
Current year plus base year amount divided by base year amount
Base year amount divided by current year amount plus base year amount
Base year divided by current year amount minus base year amount
Ans : Formula for Horizontal analysis: Current year minus base year amount divided by base
year amount
Question 10.10. In vertical analysis on a balance sheet, what is the base for accounts payable?
(Points : 4)
Total liabilities divided by current assets
Total assets
Current assets
Total liabilities and stockholders’ equity
Ans : In vertical analysis on a balance sheet, the base amount for accounts payable is Total

3. assets.
Question 11.11. Which analysis tool would be used to determine days’ sales in receivables?
(Points : 4)
Horizontal analysis
Vertical analysis
Change analysis
Ratio analysis
Ans : Ratio analysis is used as a tool to determine day’s sales in receivables.
Question 12.12. How does vertical analysis present each financial statement item? (Points : 4)
As a percentage of a base amount
As an increase or decrease in dollar amount
As a percentage of a prior year amount
As a ranking from lowest to highest
Ans : Vertical analysis present each financial statement item as % of a base amount.
Question 13.13. Which statement describes the current ratio? (Points : 4)
Current assets minus current liabilities
Current liabilities divided by current assets
Current liabilities plus current assets
Current assets divided by current liabilities
Ans : Current ratio is described by : Current assets divided by current liabilities
Question 14.14. Review the information below, and then answer the question that follows.
Sales - $3,000,000
Cost of goods sold - $2,500,000
Beginning inventory - $120,000
Ending inventory - $80,000
What is the inventory turnover? (Points : 4)
2.5 times
3 times
25 times
30 times
Ans : COGS = $2,500,000, Avg Inventory $100,000. Inventory turnover =25 times
Question 15.15. A company had $565,000 of net income; $43,000 of income taxes; and $63,000
of interest expense. What is the times interest earned ratio? (Points : 4)
7.28 times
8.29 times

4. 8.97 times
13.1 times
Ans : TIE = EBIT/Interest= 671000/63000=10.65 times. None of the answers match it
1. Which analysis tool determines the percentage of increase or decrease over time? (Points : 4)
Vertical analysis
Change analysis
Horizontal analysis
Ratio analysis
Ans; Horizontal Analysis determines the percentage of increase or decrease over time.
Solution
1. Which analysis tool determines the percentage of increase or decrease over time? (Points : 4)
Vertical analysis
Change analysis
Horizontal analysis
Ratio analysis
Ans; Horizontal Analysis determines the percentage of increase or decrease over time.
Question 2.2. The company president wants to determine how his company compares to his main
competitor. Which analysis tool will his accountant use? (Points : 4)
Intracompany comparison
Intercompany comparison
Ratio comparison
Industry comparison
Ans : Intercompany comparison is the tool that his accountant will use.
Question 3.3. An accountant wants to determine how net income compared to sales last month.
Which analysis tool would the accountant use? (Points : 4)
Vertical analysis
Horizontal analysis
Change analysis
Linear analysis
Ans; The accountant will use the vertical analysis of the last month.
Question 4.4. Is there any effect on the percentage of net income to sales if the cost of goods sold
increased as a percentage of sales, and operating expenses increased as a percentage of net
income? (Points : 4)
Yes, it increases

5. Yes, it decreases
No, there is no effect
There is insufficient data.
Ans: COGS as % of sales & Operating expenses as % of net income rises, the Net income has an
effect and it decreases. Option 2 is correct.
Question 5.5. What is an advantage of vertical analysis? (Points : 4)
Allows for the comparison of prior years’ financial data
Allows for the analysis of changes in percentages of specific financial statement items
Allows for the comparison of large and small companies
Allows for the analysis of yearly changes in specific financial statement items
Ans : Advantage of vertical analysis is that it Allows for the comparison of large and small
companies.
Question 6.6. What is another name for common-size analysis? (Points : 4)
Ratio analysis
Vertical analysis
Change analysis
Horizontal analysis
Ans : Another name of common-size analysis is Vertical analysis.
Question 7.7. What does vertical analysis evaluate? (Points : 4)
Increases or decreases in financial statement items
Comparison with prior year financial data
A financial statement item as a percentage of a base amount
A financial statement item compared with prior month amount
Ans : Vertical analysis evaluates A financial statement item as a percentage of a base amount
Question 8.8. When performing vertical analysis on an income statement, what is the base item?
(Points : 4)
Net income
Net sales
Gross profit
Gross sales
Ans ; When performing vertical analysis on an income statement , Net sales is the base amount.
Question 9.9. What is the formula for horizontal analysis of changes since the base year? (Points
: 4)
Current year plus base year amount divided by base year amount
Base year amount divided by current year amount plus base year amount

6. Base year divided by current year amount minus base year amount
Ans : Formula for Horizontal analysis: Current year minus base year amount divided by base
year amount
Question 10.10. In vertical analysis on a balance sheet, what is the base for accounts payable?
(Points : 4)
Total liabilities divided by current assets
Total assets
Current assets
Total liabilities and stockholders’ equity
Ans : In vertical analysis on a balance sheet, the base amount for accounts payable is Total
assets.
Question 11.11. Which analysis tool would be used to determine days’ sales in receivables?
(Points : 4)
Horizontal analysis
Vertical analysis
Change analysis
Ratio analysis
Ans : Ratio analysis is used as a tool to determine day’s sales in receivables.
Question 12.12. How does vertical analysis present each financial statement item? (Points : 4)
As a percentage of a base amount
As an increase or decrease in dollar amount
As a percentage of a prior year amount
As a ranking from lowest to highest
Ans : Vertical analysis present each financial statement item as % of a base amount.
Question 13.13. Which statement describes the current ratio? (Points : 4)
Current assets minus current liabilities
Current liabilities divided by current assets
Current liabilities plus current assets
Current assets divided by current liabilities
Ans : Current ratio is described by : Current assets divided by current liabilities
Question 14.14. Review the information below, and then answer the question that follows.
Sales - $3,000,000
Cost of goods sold - $2,500,000
Beginning inventory - $120,000
Ending inventory - $80,000

7. What is the inventory turnover? (Points : 4)
2.5 times
3 times
25 times
30 times
Ans : COGS = $2,500,000, Avg Inventory $100,000. Inventory turnover =25 times
Question 15.15. A company had $565,000 of net income; $43,000 of income taxes; and $63,000
of interest expense. What is the times interest earned ratio? (Points : 4)
7.28 times
8.29 times
8.97 times
13.1 times
Ans : TIE = EBIT/Interest= 671000/63000=10.65 times. None of the answers match it
1. Which analysis tool determines the percentage of increase or decrease over time? (Points : 4)
Vertical analysis
Change analysis
Horizontal analysis
Ratio analysis
Ans; Horizontal Analysis determines the percentage of increase or decrease over time.