Match each definition that follows with the term a-h it defines.
-requires a restatement of prior-period financial statements
A)discontinued operations
B)extraordinary items
C)change from one generally accepted accounting principle to another
D)horizontal analysis
E)vertical analysis
F)common-sized financial statements
G)current position analysis
H)profitability analysis

Question

Quizplus · Accepted Answer

This is a change in accounting principle, which requires restating prior-period financial statements to make them comparable.

Answer: A
 Discontinued operations refer to the sale or closure of a significant segment of a company's business, which requires a restatement of prior-period financial statements.

Answer: D
 Horizontal analysis compares financial statements from multiple periods to identify changes and trends.

Answer: F
 Common-sized financial statements express each line item as a percentage of a base number, such as total assets or sales, to facilitate comparison.

Answer: E
 Vertical analysis expresses each line item as a percentage of a total, such as net sales or operating expenses, to show the relative importance of each item.

Answer: G
 Current position analysis, also known as liquidity analysis, evaluates a company's ability to meet short-term obligations.

Answer: H
 Profitability analysis examines a company's ability to generate profits from its operations.

Match Each Definition That Follows with the Term A-H It