Chap 5

Question 1

the process of evaluating risks, performance, financial health, and future prospects of
a business using computational and analytical techniques with the objective of making
economic decisions.

Answer 1

FINANCIAL STATEMENT ANALYSIS

Question 2

also known as trend analysis.
-is a technique that involves the comparison of a line item (account) over a number of
periods.Uses financial statements of two or more periods.
-Can be expressed in monetary value (peso) or percentages computed by using the
following formulas:

Answer 2

Horizontal analysis

Question 3

Peso change =

Answer 3

Balance of Current Year - Balance of Prior Year

Question 4

Percentage change =

Answer 4

Peso Change/Balance of Prior Year

Question 5

Is the preparation of common-size financial statements.
-It is a technique that expresses each financial
statement line item as a percentage of a base amount.

Answer 5

Vertical analysis

Question 6

shows each line account as a percentage of total
assets.
-from that asset side, we can infer the composition
of assets and the company’s financing mix.

Answer 6

Common size SFP

Question 7

● expresses each line as a percentage of sales/net sales.
● this way, we can see how sales are “used up” by various expenses.

Answer 7

Common Size SCI

Question 8

show standardized or relative amounts that enable the
readers to make comparison of companies of different sizes

Answer 8

Commmon SIze Financial Statement