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Basic Question 4 of 11
Which one of the following is generally the best indicator of growth or decline in a business?
B. Common-size statements
C. Trend statements
A. Comparative income statements and/or balance sheets
B. Common-size statements
C. Trend statements
User Contributed Comments 5
| User | Comment |
|---|---|
| kalps | Trend statements use a base index and then compare it to that. COmmon size statements is more of a year on year comparison |
| MattNYC | is this another name for Horizontal common-size analysis?? |
| viannie | Trend analysis = Horizontal common size (MattNYC, u r right ;) Vertical analysis => is to look within 1 year's performance. Horizontal analysis => to look across several year compared to a base year |
| gill15 | So why is B wrong? It a common size statement(Horizontal)? Is it just not specific enough? |
| Kevdharr | gill15, common size statements can be both vertical and horizontal. So yes, I think the answer simply wasn't specific enough as you said. If it would have said "horizontal common-size balance sheets", then there would have definitely been some confusion due to the fact that 2 of the answers would have technically been correct. But since it simply said "Common-size statements", and we know that trend statements always show growth and/or decline over time, you have to go with the latter. That definitely was a bit tricky, though. |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
describe tools and techniques used in financial analysis, including their uses and limitations
CFA® 2025 Level I Curriculum, Volume 3, Module 11.