ACC 100 Chapter 10 Exam Questions with Correct Answers Latest Update 2024 (Already Passed)
comparative - Answers means that the business is providing both the current year's statements as well as the prior year's statements (sometimes as many as 4 prior years are provided). This allows stakeholder...
comparative - Answers means that the business is providing both the current year's statements as well
as the prior year's statements (sometimes as many as 4 prior years are provided). This allows
stakeholders to "compare" the financial position and performance over time.
What are the two main types of analysis you will complete? - Answers Horizontal Analysis and Vertical
So what is the main goal of horizontal analysis? - Answers The main goal is to identify (spot, discover)
important trends (changes over time).
Why is Horizontal analysis important to stakeholders, including the business owner? - Answers For the
business owner it is important because, sometimes, business owners focus on the day-to-day operations
and lose focus on the overall company. Trend analysis helps the business owner to look at the business
as a whole and see which direction it is headed in.
horizontal analysis - Answers Horizontal analysis calculates the trend between one year and the next. It
allows you to see the important changes that have occurred over time. For instance, comparing
inventory balances over time allows a business to see if its inventory levels are increasing, decreasing, or
similar to the prior year.
What is another name for horizontal analysis? - Answers Intra company comparative analysis
There are two main types of horizontal comparative analysis. What are the two types and how are they
different? - Answers Preceding-form prior year
Trend analysis - base year(single chosen year)
When looking at a comparative balance sheet, where is the most current year shown? - Answers To the
left
What is the formula for calculating horizontal analysis? - Answers New-old/old (NOO)
What are the two things that Prof. Jakovich points out that is important to know about horizontal
analysis? - Answers Percents not meant to add up however.
Total Asset=Total liabilities +Equity
Can you do horizontal analysis for the income statement? - Answers Yes. Same thing(NOO)
Did the business pay any dividends in 2016? If so, how much was paid in dividends? (Think about the
statement of retained earnings and solve!) - Answers can compare retained earnings
vertical analysis. - Answers Vertical analysis shows the relationship between different items on the same
financial statement.
, Can you do vertical analysis on two different businesses? - Answers yes cans how whats more liquid no
matter the ammount
an you perform vertical analysis on the income statement? - Answers Absolutely! For the income
statement you calculate every amount as a percentage of net sales. You can then compare that amount
between years in one business OR compare the vertical analysis between two different businesses
within the same industry. Both will provide information that will allow you to assess the business's
performance.
How is vertical analysis shown on a balance sheet? - Answers % of Total assets
How is vertical analysis shown on an income statement? - Answers % of net sales
What about the statement of cash flows? - Answers Remember that the purpose of the statement of
cash flows is to explain the change in cash from the beginning of the year to the end of the year by
looking at the inflows and outflows of cash within the three different activities.
What are the three business activities on the statement of cash flows? - Answers Recall that the
statement of cash flows is divided between operating, investing, and financing activities. All these
activities are important when analyzing the statement of cash flows and understanding the three
activities helps stakeholders to assess a business.
What is cash flow from operating activities and why is it important? - Answers Cash from operating
activities is often called the life-blood of a business. Although businesses can increase their cash inflow
through investing activities (selling property, plant, equipment, intangibles) and financing activities
(increasing their loans or capital contributions from owners) these sources of cash cannot be used
forever.
Why is cash important for the long term? - Answers Because sustainable cash flows are recurring
(repeating) cash flows and this can only be from a business's operations. Cash flows from operations is a
renewable resource!
How do you analyze the cash flow from operating activities? - Answers Step 1: Is there a positive inflow
of cash from operating activities?
Step 2: Compare the cash flow from operating activities with the profit on the income statement.
Step 1: Is there a positive inflow of cash from operating activities? - Answers Over the years (if you have
comparative cash flow statements) are the cash flows from operating activities increasing or decreasing?
Because it is the only sustainable source of cash you want to see a cash inflow from operations either
increasing over time or holding steady (similar amounts every year).
Step 2: Compare the cash flow from operating activities with the profit on the income statement. -
Answers If cash flow from operations is higher than the profit on the income statement that is
considered positive because it means that the business is collecting the cash from their customers and
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