Essay Questions 119.Indicate whether each of the following statements is true or false. Some forms of financial statement analysis involve identifying changes in the same item for the same company...

Essay Questions

119.Indicate whether each of the following statements is true or false.


Some forms of financial statement analysis involve identifying changes in the same item for the same company over a period of time.
Some forms of financial statement analysis involve comparing operations of different companies in the same industry.
Vertical analysis is also called trend analysis.
Vertical analysis refers to studying the behavior of individual financial statement items over several periods.
Horizontal analysis could be done using changes in the absolute dollar amount of an item or trends in percentages.
120.Indicate whether each of the following statements about financial statement analysis is true or false.


Meaningful comparisons between two companies generally should be made using percentage analysis or ratio analysis, not absolute amounts.
The materiality of accounting information refers to whether it is viewed as favorable (good news) or unfavorable (bad news).
Companies must account for immaterial items in compliance with generally accepted accounting principles.
To judge the materiality of an absolute financial statement amount, one must consider the size of the company reporting it.
Comparing percentages derived from financial statement analysis has the drawback of varying materiality levels.