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40.Which of the following types of analysis is useful in computing the relationships among the components of the financial statements for the same period? a.Ratio analysis b.Vertical analysis c.Operational analysis d.Horizontal analysis
Expert Answer
Answer: b.Vertical analysis
Explanation:
Vertical analysis is a technique for analyzing the relationships between the items on any one of the financial statements in one reporting period. The analysis results in the relationships between components expressed as percentages that can then be compared across periods. This method is often referred to as “common sizing” financial statements.
