Q1: 1. In comparative financial statements, what does the term "horizontal analysis" refer to?

• A) Comparing financial data of one company over different time periods
• B) Comparing financial data of different companies in the same time period
• C) Comparing financial data of one company with industry averages
• D) Comparing financial data of one company with projected estimates

Q2: 2. Which financial statement is commonly used to prepare horizontal analysis?

• A) Income statement
• B) Balance sheet
• C) Cash flow statement
• D) Statement of changes in equity

Q3: 3. When conducting vertical analysis in comparative statements, what do you express each item as a percentage of?

• A) Total assets
• B) Total liabilities
• C) Net income
• D) Total revenue

Q4: 4. Which of the following is a common objective of using comparative statements?

• A) Evaluate the financial performance of a company
• B) Determine the market share of a company
• C) Analyze the industry trends
• D) Measure the environmental impact of a company

Q5: 5. If a company's net income has decreased by 15% compared to the previous year, what type of analysis is being conducted?

• A) Vertical analysis
• B) Horizontal analysis
• C) Ratio analysis
• D) Comparative analysis

Q6: 6. Which financial statement shows the overall financial position of a company at a specific point in time?

• A) Income statement
• B) Statement of changes in equity
• C) Cash flow statement
• D) Balance sheet

Q7: 7. If a company's current assets have increased by 10% and its current liabilities have increased by 5%, what impact does this have on the current ratio?

• A) Increases
• B) Decreases
• C) Remains the same
• D) Cannot be determined

Q8: 8. What does a common-size income statement express?

• A) Each item as a percentage of total assets
• B) Each item as a percentage of net income
• C) Each item as a percentage of total revenue
• D) Each item as a percentage of total liabilities

Q9: 9. Which of the following is a limitation of using comparative statements for financial analysis?

• A) Lack of industry benchmarks
• B) Time-consuming to prepare
• C) Subjective interpretation of data
• D) Inability to compare with competitors

Q10: 10. If a company's gross profit margin has decreased from 40% to 35%, what does this indicate?

• A) Improved profitability
• B) Decreased profitability
• C) Stable profitability
• D) No impact on profitability

Q11: 11. What is the purpose of preparing common-size financial statements?

• A) To compare financial data across different companies
• B) To analyze the trend of each item in relation to a base amount
• C) To determine the market value of a company
• D) To calculate the return on investment

Q12: 12. When conducting vertical analysis, which item is typically used as the base for expressing other items as a percentage?

• A) Total liabilities
• B) Total revenue
• C) Net income
• D) Total assets

Q13: 13. If a company's debt-to-equity ratio has increased, what does this indicate?

• A) Improved financial stability
• B) Increased financial risk
• C) Enhanced profitability
• D) Decreased liquidity

Q14: 14. Which of the following is a benefit of using comparative financial statements?

• A) Simplified data presentation
• B) Improved accuracy of financial data
• C) Enhanced decision-making
• D) Reduced need for audits

Q15: 15. If a company's operating expenses have decreased while its net income has increased, what type of analysis would be useful to understand this trend?

• A) Vertical analysis
• B) Horizontal analysis
• C) Ratio analysis
• D) Common-size analysis

Q16: 16. What financial statement shows the cash flows in and out of a company during a specific period?

• A) Income statement
• B) Balance sheet
• C) Statement of changes in equity
• D) Cash flow statement

Q17: 17. If a company's inventory turnover ratio has decreased, what does this suggest?

• A) Improved efficiency in managing inventory
• B) Decreased sales volume
• C) Increased liquidity
• D) Reduced cost of goods sold

Q18: 18. What does a trend analysis in comparative statements focus on?

• A) Changes in financial data over different time periods
• B) Comparison of financial data between different companies
• C) Evaluation of internal controls
• D) Forecasting future financial performance

Q19: 19. Which financial statement reflects the revenues, expenses, and profits or losses generated by a company during a specific period?

• A) Income statement
• B) Balance sheet
• C) Statement of changes in equity
• D) Cash flow statement

Q20: 20. If a company's return on assets has decreased, what does this indicate?

• A) Improved efficiency in asset utilization
• B) Decreased profitability relative to its assets
• C) Increased liquidity
• D) Enhanced solvency

Q21: 21. What does a common-size balance sheet express?

• A) Each item as a percentage of total revenue
• B) Each item as a percentage of total assets
• C) Each item as a percentage of net income
• D) Each item as a percentage of total liabilities

Q22: 22. In comparative financial statements, what does the term "cross-sectional analysis" refer to?

• A) Comparing financial data of one company over different time periods
• B) Comparing financial data of different companies in the same time period
• C) Comparing financial data of one company with industry averages
• D) Comparing financial data of one company with projected estimates

Q23: 23. If a company's quick ratio has decreased, what does this suggest about its liquidity position?

• A) Improved liquidity
• B) Decreased liquidity
• C) Stable liquidity
• D) No impact on liquidity

Q24: 24. What is the main purpose of using comparative statements in financial analysis?

• A) To identify fraudulent activities
• B) To assess the financial health of a company
• C) To determine the market share of a company
• D) To predict stock prices

Q25: 25. If a company's asset turnover ratio has increased, what does this indicate?

• A) Decreased efficiency in generating sales from its assets
• B) Improved profitability
• C) Decreased liquidity
• D) Enhanced solvency