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Activity 2 deepen your understanding assume that you

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Activity 2: Deepen your understanding!Assume that you have several thousand pesos to invest in a company. Giventhat “people will always have to eat”, you have decided to explore the possibility ofinvesting inChicken WingsandBurger Max. However, you can only afford toinvestyour money in one company. You want to know which of the two fast foodcompaniesis the better choice. Chicken Wings and Burger Max generated netincome in the pastyear based on the Statement of Comprehensive Income were10 000 000 and9 000 000, respectively. Looking at the Statement of Financial Position(SFP), youfound out that Chicken Wings and Burger Max has reported total assetsof20 000000 and18 000 000, respectively. Based on these information, whichcompanyshould you invest in?AssessmentPart I. TRUE OR FALSEWrite “TRUE” if the statement is correct, otherwise, write “FALSE” on a separatesheetof paper.1.Financial statements are useless to a person who does not know how tointerpret the information contained in the report.2.Companies are required to show figures to the previous year figures offinancial statements.3.The technique of taking previous year figures as base and comparing withsubsequent years is called ratio analysis.4.The ascertainment of trends helps in making forecasts.5.Firm A reported inventory balances of100 000 and50 000 in 2019 and2018, respectively. In a horizontal analysis, a financial statement user wouldconclude that Firm A’s inventory has increased by 50% from 2018 to 2019.6.In 2019, Firm A reported sales of100 000 and a profit of20 000. In avertical analysis, a financial statement user would conclude that Firm A wasable to generate 20% profit from every peso of its sales during the period.7.At the beginning of the day, you have200 cash in your pocket. At the endofthe day, you have50 left. If you make a horizontal analysis of yourpocket,you would conclude that your cash has decreased by 80% duringthe day.13

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