Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 24 - Full Disclosure in Financial Reporting - Review and Practice - Questions - Page 1446: 24

Answer

Ratio analysis is a device used to analyze an entity's liquidity, activity, profitability and coverage. Percentage analysis is a device used in the evaluation and comparison of entities. Percentage analysis entails the reduction of amounts that are related to percentages based on specific bases. To illustrate, percentage analysis could be used to express an item, such as the cost of gold sold as a percentage of an entity's total sales revenue.

Work Step by Step

Ratio analysis is a device used to analyze an entity's liquidity, activity, profitability and coverage. Percentage analysis is a device used in the evaluation and comparison of entities. Percentage analysis entails the reduction of amounts that are related to percentages based on specific bases. To illustrate, percentage analysis could be used to express an item, such as the cost of gold sold as a percentage of an entity's total sales revenue.
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