Scribd
Upload
298 views5 pages

After Reading and Comprehending The 1st Part of Our Discussion Under Financial Statement Analysis

This document provides instructions and problems for a self-assessment exercise on financial statement analysis. It covers two parts: 1) True/False questions and 2) problems involving horizontal analysis and common-size financial statements. The purpose is for students to test their understanding of concepts learned, rather than achieve a perfect score. Answers should be written in the student's journal and can be checked against the provided solutions. When checking answers, a different colored pen should be used to provide evidence of independent work.

Uploaded by

Van Errl Nicolai Santos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
298 views5 pages

After Reading and Comprehending The 1st Part of Our Discussion Under Financial Statement Analysis

This document provides instructions and problems for a self-assessment exercise on financial statement analysis. It covers two parts: 1) True/False questions and 2) problems involving horizontal analysis and common-size financial statements. The purpose is for students to test their understanding of concepts learned, rather than achieve a perfect score. Answers should be written in the student's journal and can be checked against the provided solutions. When checking answers, a different colored pen should be used to provide evidence of independent work.

Uploaded by

Van Errl Nicolai Santos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

After reading and comprehending the 1st part of our discussion under Financial Statement Analysis, your

are now ready to take some exercises. This self-assessment activity covers two parts:

1. True or false; and

2. Straight problem solving- Horizontal analysis of Comparative Statements (Increase-Decrease


Method)- Trend Analysis-  Vertical Analysis or Common Size Financial Statements

Reminders:

1. This is not a graded assessment.

2. Write your answers including supporting computations in your JoL.

3. A Google Drive link is provided for the answers and solutions. 

4. Use another color of ball pen when correcting your answers as an evidence that you actually
answered the items before looking at the solution.

5. Perfect score here is irrelevant. 

6. The very purpose of this activity is to test yourself whether or not you have learned something
from the discussion.

Part 1: True or false. Write the word "True" if the statement is correct, otherwise write "False".

1. Financial analysis is primarily a matter of making relevant mechanical computations. 

2. Percentage changes usually are computed by use of the amounts for the latest accounting period
as a base.

3. The peso amount of change during an accounting period for an item appearing in financial
statements is less significant than the change measured as a percentage.

4. A business enterprise's earnings performance and its financial condition are the two primary
concerns of the financial analyst.

5. An increase in sales volume generally is accompanied by a proportionate increase in net income. 

6. On a, common-size income statement, net income is given an equivalent of 100%. 

7. The peso amount of a change during a period in a certain item appearing in financial statements
is probably less significant than the change measured as a percentage. 

8. Percentage changes are usually computed by using the latest figure as a base.

9. It is possible that a decrease in gross profit rate may be offset by a decrease in expenses, thus
resulting in an increase in net income. 

10. Industry standards tend to place the performance of a company in a more  meaningful
perspective. 

11. Short-term creditors generally are more concerned with vertical analysis than with horizontal
analysis.

12. Horizontal analysis is possible for both an income statement and a statement of financial
position.

13. Common-size financial statements show peso change in specific items from one year to the next.
Part 2

Problem 1

Requirements:

1. Compute the missing changes in peso amounts and percentages in the above statements.
2. Evaluate the company's short-term financial position, leverage, managerial efficiency and
profitability using the Horizontal Analysis method.

Problem 2

Requirements:

1. Express all of the asset, liability, and sales in trend percentages. (Show percentages for each
item.) Use Year 1 as the base year, and carry computations to one decimal place.

2. Comment on the result of your analysis.

Problem 3

ValuePlus, In., was organized several years ago to develop and market computer software programs. The
company is small but growing, and you are considering the purchase of some of its ordinary shares as an
investment. the following data on the company is available for the past two years:
The president of ValuePlus, Inc., is very concerned. Sales increased by P2.5 million during 2014, yet the
company's net income increased by only P105,000. Also, the company's operating expenses went up in
2014, even though a major effort was launched during the year to cut costs.

Requirements:

1. For both 2013 and 2014, prepare the income statement and the statement of financial position in
common-size form. (Round computations to one decimal place.)

2. From your work in (l) above, explain to the president why the increase in profits was so small in
2014. Were any benefits realized from the company's cost-cutting efforts? Explain.

You might also like