This Advanced Financial Analysis (AFA) Quiz is a comprehensive tool designed for business and management students looking to master the intricacies of financial analysis. It covers essential topics such as trend analysis, ratio interpretation, intra- and inter-company comparisons, and absolute valu...
ACCOUNTING
Block 2.1 - Advanced Financial Accounting (AFA) Quiz
Main Tools and Techniques of Analysis
Edition: 2024/2025
Compiled By: Simon Mwangi
, Accounting 2 of 5 pages
Circle the letter of the Answer that corresponds to the displayed Question.
1
Question: state the 2 types of trend analysis?
a) quotient between related magnitudes
b) compare correlative masses of BS and shows image of financial balances - group assets by
homogeneous masses and compare difference of correlative masses (assets) of different signs
c) 1. year on year changes = interannual variations, applied at diff levels & groupings, for a few years
2. index numbers = specific year as a reference base, difficulty choosing base year (can distort trends if
not chosen properly), used over many years
d) compare correlative masses of BS and shows image of financial balances - group assets by
homogeneous masses and compare difference of correlative masses (assets) of different signs
Correct Answer: 1. year on year changes = interannual variations, applied at diff levels & groupings,
for a few years 2. index numbers = specific year as a reference base, difficulty choosing base year (can
distort trends if not chosen properly), used over many years
Explanation: The two types of trend analysis are year-on-year changes (interannual variations) and
index numbers, which use a specific year as a reference base. Choosing the correct base year is crucial
to avoid distortions in trends.
2
Question: what are differences in absolute values?
a) different items or equity groupings of the same accounting statement are compared - working capital
- different levels of results - calculation of balance positions static measurements = reduces validity of
conclusions
b) 1. year on year changes = interannual variations, applied at diff levels & groupings, for a few years
2. index numbers = specific year as a reference base, difficulty choosing base year (can distort trends if
not chosen properly), used over many years
c) differences in end of year date - differences in application of accounting principles and criteria
d) average maturation period - gross margin variation analysis - breakeven - financial leverage
Correct Answer: different items or equity groupings of the same accounting statement are compared -
working capital - different levels of results - calculation of balance positions static measurements =
reduces validity of conclusions
Explanation: Differences in absolute values refer to comparing different items or equity groupings in
the same accounting statement. These static measurements, such as balance positions, can reduce the
validity of conclusions.
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