If the assets shown on a balance sheet are subjected to vertical analysis (using total assets as the base), a decrease in the figure for noncurrent assets from 55% to 40% would always mean that:
A)the dollar amount of current assets has decreased.
B)total noncurrent assets have decreased as a percentage of total assets.
C)both A and B are correct.
D)neither A nor B are correct.

Question

Quizplus · Accepted Answer

A decrease in the figure for noncurrent assets from 55% to 40% would mean that total noncurrent assets have decreased as a percentage of total assets. It does not necessarily mean that the dollar amount of current assets has decreased, so option A is not always correct. Therefore, option B is the best choice.

If the Assets Shown on a Balance Sheet Are Subjected