Chapter 14 (Managerial Accountancy)

Common-size financial statements

A statement that shows the items appearing on it in percentage form as well as in dollar form. On the income statement, the percentages are based on total sales revenue; on the balance sheet, the percentages are based on total assets. (p. 663)

Financial leverage

A difference between the rate of return on assets and the rate paid to creditors. (p. 670)

Horizontal analysis

A side-by-side comparison of two or more years’ financial statements. (p. 661) 

Trend analysis

See Horizontal analysis. (p. 661)

Trend percentages

 Several years of financial data expressed as a percentage of performance in a base year. (p. 661)

Vertical analysis

The presentation of a company’s financial statements in common-size form. (p. 663)