Importance and Elements of Financial Statement Analysis

The objective of financial statements is to prepare financial statements in accordance with all applicable standards.

• To prepare a statement of financial position and statement of comprehensive income.

• To present relevant, reliable comparable and understandable information.

• To prepare financial statements in accordance with all applicable standards.

• To provide information about the financial position, financial performance and changes in financial position useful to a wide range of users.

What is the formula for stockholders equity?

• Stockholders equity = Assets x Liabilities

• Stockholders equity = Assets + Liabilities

• Stockholders equity = Liabilities - Assets

• Stockholders equity = Assets - Liabilities

The components of an auditor’s report are:

• introductory section

• required supplemental section

• financial section

• all above

Balance sheet presents the company’s income and expenditures.

• True

• False

Additional information expected in the annual report

• statement of changes in equity

• cash flow statement

• report on the environment

• statement of retained profits

A conceptual framework for financial reporting is:

• a set of financial reporting standards

• a set of items which make up an entity's financial statements

• a set of principles which underpin financial reporting

• a set of regulations which govern financial reporting

COGS= Beginning Inventory + Purchases – Ending Inventory.

• True

• False

The major financial statement include all, except

• income statement

• statement of change in financial position

• statement of cash flow

• statement of retained profits

Analyses changes in financial statement for 2 or more accounting periods using historical data

• Financial ratio analysis

• Industry analysis

• Horizontal analysis

• Vertical analysis

Common size statements are an example of

• Vertical analysis

• Horizontal analysis

• Both

• Neither