4. An analysis of the intenelationships of infommation in a single period, expressed as parcentages of a common denomirator, is called horizortal analysis. 5. A comparison of infomation from one period to aother is called vertical analysis. 6. When making business decisions, an entrepreneur will need various sources of information. A major source of information is the firancial statements.
4. An analysis of the intenelationships of infommation in a single period, expressed as parcentages of a common denomirator, is called horizortal analysis. 5. A comparison of infomation from one period to aother is called vertical analysis. 6. When making business decisions, an entrepreneur will need various sources of information. A major source of information is the firancial statements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
4,5,6,7
Transcribed Image Text:Directions: Read each senterce carefully and determine whether the statement is TRUE or FALS E. Write
your answers on the space provided before each number.
1. At the beginning of the day, you have P200 cash in your pocket. At the end of the day,
you have P50 left. If you make a horizontal analysis of your cash, you would conclude that your cash has
decreased by 80% during the day.
2. In 2019, Entity A reported sales of P100 and profit of P20. In a vertical analysis, a
financial statement user would conclude that Entity A was able to generate 20% profit from every peso of
its sales during the period.
3. Entity A reported irventory balances of P100 and P50 in 2019 and 2018, respectively.
In a horizontal analysis, a financial statement user would conclude that Entity A's inventory has increased
by 50% from2018 to 2019.
4. An analysis of the intenelationships of infomation in a single period, expressed as
parcentages of a common denomirator, is called horizortal analysis.
5. A comparison of infomation from one period to amther is called vertical analysis.
6. When making business decisions, an entrepreneur will need various sources of
information. A major source of infomation is the firancial statements.
7. Financial statements are useless to a person who does not know how to interpret the
informationcontained in the report.
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