Question

1) Vertical analysis is also referred to as

	a.	time series analysis
	b.	common size analysis
	c.	trend analysis
	d.	financial analysis

2) The dividend yield

	a.	measures the current return on the common stock
	b.	equals dividends per share divided by stock price
	c.	shows market strength, which measures the strength of the owners
	d.	all are true

3) Which of the following would be considered an improper recognition?

	a.	not recording a liability
	b.	classifying a current asset as long-term to make then financial ratios higher
	c.	classifying receipt for an annual magazine subscription as income when the cash is received
	d.	all are correct

Answer 1

1). Answer- b. Common size Analysis.

Explanations-

Vertical analysis is a method of financial analysis in which each line item is listed as a percentage of a bese figure within the statement.

In the income statement every item is expressed as a percentage of sales or revenue. And in the balance sheet every item is stated as a percentage of balance sheet total. Vertical analysis is also known as common size financial statement.

2). Answer- d. All are true.

Explanations-

The dividend yield means the dividend expressed as the percentage of current share price. dividend yield is equals dividend per share divided by market price of stock. It shows the market strength. it is the amount of money a company pays to its share holder for owning a share.

Dividend yield = dividend per share / market price per share.

3. Answer- d. All are correct.

Explanations-

If the balances recorded in the final accounts does not depicts a true and clear picture or the figures are misleading then it is said to be improperly recognised.

Classify a current asset as long term to make the financial ratio higher, not recording a liability as well as classifying receipts for the annual magazine subscription as income when the cash is received is improper.

Not recording liability is an error of omission.

Classifying receipt for an annual magazine subscription as income when the cash is received is violation of accrual concept.

Classify the current asset as long term to make financial is to higher is window dressing.

Thus all the three items are improper recognition hence all are correct is right answer.