Lesson 4

Question 1

What are the differents comparative analysis of financial statements?

Answer 1

1. Intracompany Basis
2. Industry Averages.
3. Intercompany Basis

Question 2

Why is there a need for Comparative Analysis?

Answer 2

To identify if the amount in the financial statement represents an INCREASE or DECREASE over PRIOR years.

Question 3

A comparisons WITHIN a company that are often useful to detect changes in financial relationships and significant trends

Answer 3

Intracompany Basis
XYZ Corp
2012 - 2013

Question 4

A comparisons with INDUSTRY AVERAGES provide information about a company’s relative position within the industry

Answer 4

Industry Averages (SAME industry, size & area)

XYZ Corp <-> A, B, C, Corporations
A+B+C / 3

Question 5

A comparisons with OTHER companies to provide insight into a company’s competitive position.

Answer 5

Intercompany Basis (to Competitors)

Question 6

What are the tools of analysis?

Answer 6

1. Horizontal
2. Vertical
3. Ratio

Question 7

_______also called TREND analysis, is a technique for evaluating a series of financial statement data over a period.

Answer 7

Horizontal Analysis that can be express in:
- amount of change
- percentage of change

Question 8

Formula for percentage increases or
decreases

Answer 8

Change since base period = Current Year - Base Year / Base Year

Question 9

Formula for current year sales as a percentage of the base period.

Answer 9

Current Results in relation to base period = Current Year / Base Year

Question 10

__________also called COMMON-SIZE analysis, is a technique that expresses each financial statement item as a PERCENT of a base amount

Answer 10

Vertical Analysis