Question

1) Trend analysis

	a.	identifies changes over time
	b.	focus on important relationships within financial statements
	c.	presents each asset as a percentage of net sales
	d.	presents each liability as a percentage of total liabilities

2) C/G/S divided by average inventory is the

	a.	inventory turnover ratio
	b.	days inventory on hand
	c.	asset turnover ratio
	d.	days to collect

3) Another term for horizontal analysis is

	a.	industrial analysis
	b.	financial analysis
	c.	trend analysis
	d.	common size analysis

4) A company's ability to generate income is referred to as

	a.	solvency
	b.	efficiency
	c.	profitability
	d.	liquidity

Answer 1

Ans. 1 Option A

Explanation: Trend analysis measures the change in amount and percentage between two periods.

Ans. 2 Option A

Explanation:

*Inventory turnover = Cost of goods sold / Average inventory

*Days inventory on hand = Number of days in year / Inventory turnover

*Asset turnover ratio = Net sales / Average assets

*Days to collect = Number of days in year / Receivable turnover

Ans. 3 Option C

Explanation : Horizontal analysis is also known as Trend analysis.

Ans. 4 Option C

Explanation:

*Solvency = Company's ability to meet its long term liabilities.

*Efficiency = Company ability to use and manage of it's assets and liabilities.

*Profitability = Ability of a company to create earnings.

*Liquidity = Company's ability to meet its short term obligations.