Question

Time-series analysis is the same as rate of change analysis.

True

False

The adjustment necessary to convert cash-basis payments for other operating costs to accrual-basis operating expenses requires the addition of ending prepaid expenses to the beginning prepaid expenses, subtracting the beginning accrued expenses from this amount, and finally adding the ending accrued expenses.

True

False

In common-size analysis, all balance sheet items and income statement items are presented as a percentage of total assets.

True

False

Answer 1

1) Time-series analysis is the same as rate of change analysis.

False. Time series analysis is a collection of quantitative observations that are evenly spaced in time and measured successively. Rate of change indicator measures the percentage change of the current value as compared to the value a certain number of periods ago.

2) False.

The adjustment necessary to convert cash-basis payments for other operating costs to accrual-basis operating expenses requires the subtracting of ending prepaid expenses to the beginning prepaid expenses, subtracting the beginning accrued expenses from this amount, and finally adding the ending accrued expenses.

3) In common-size analysis, all balance sheet items and income statement items are presented as a percentage of total assets.

False. Under Common size-analysis, Income statement items are stated as a percent of net sales and balance sheet items are stated as a percent of total assets (or total liabilities and shareholders' equity).