Quiz Ch 12 – T/F The Significance of Income Statement in Public Company’s Annual Report
Financial Accounting
Thomas, Tietz, and Harrison
12th Edition
The income statement initiates the annual report filing of every public company.
The income statement initiates the annual report filing of every public company.
The horizontal analysis employs trend percentages.
Vertical analysis is a useful tool for comparing companies of different sizes.
Benchmarking involves comparing a company’s performance to industry standards.
The horizontal analysis gives a comprehensive view of a business by showing changes in financial statement line items over time.
Common-size financial statements display figures only in dollar amounts.
Consistent growth in income from operations signifies revenue expansion, but potentially uncontrolled expenses, indicating future growth and increased company value.
The Management’s Discussion and Analysis section of the annual report contains the management’s rationale for fluctuations in sales.
The vertical analysis compares balance sheet line items between current and prior periods.
If a company’s net income is 15% of sales, then according to vertical analysis, the cost of goods sold must be 85% of sales.