xacc 280 - Solutions Guide: Please do not present as your...

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Solutions Guide: Please do not present as your own. I sometimes post solutions from the book’s solutions manual, or a mix of my work and the books solutions manual. But this is only meant as a solutions guide for you to answer the problem on your own. I recommend doing this with any content you buy online whether from me or from someone else. CheckPoint: Ratio, Vertical, and Horizontal Analyses The calculations you perform for this CheckPoint form the basis of your analysis of your capstone project. · Write in 100 to 200 words an explanation of the three tools of financial statement analysis and the function of each. · The three tools of financial statements analysis are: first: Horizontal (Trend) Analysis which evaluates the performance of the company from one accounting period to the next. The comparison could be in the form of a number or a percentage; Second: Vertical (Common Size) Analysis which expresses each financial statement as a percentage of a base amount. This type of analysis is particularly useful when management wants to see the percentage of assets does cash, accounts receivable, inventory represent. This helps management to make decisions regarding its credit policy, its inventory policy …etc. It is also important to see the percentages of cost of goods sold, salaries expenses, utilities expenses---etc to Sales. Third: Ratio Analysis which expresses the relationship among selected items in the financial statements, the relationship is expressed in terms of a percentage, rate or a proportion. This is a very important analysis tool that is used by both internal and external users of financial statements, suppliers and short-term
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xacc 280 - Solutions Guide: Please do not present as your...

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