Question

The percent of fixed assets to total assets is an example of:     

profitability analysis

vertical analysis

solvency analysis

horizontal analysis

Answer 1

Concepts and reason

Ratio Analysis: It is a technique by which the financial position of a company is analyzed. This technique involves computing different ratios in order to compare the current position of the company with an earlier period or to evaluate the current position.

Fundamentals

Vertical Analysis: It is the technique of financial statement analysis which reflects each item of the financial statement as a percentage of base amounts of the financial statement.

Assets: It can be defined as the resources owned by the organization which is capable of providing some future benefits. On the basis of duration of time assets are of two types which are 1. Current Assets and 2. Fixed Assets

Profitability Analysis: Profitability analysis is the technique of financial statement analysis which reflects the analysis of profitability of the organization’s output.

Solvency Analysis: Solvency Analysis is the technique of financial statement analysis which reflects the company ability to pays its debts and interest on such debts.

Horizontal Analysis: Horizontal analysis is a comparison of financial data for several years against a base year. It is a study of percentage changes in the items of the financial statement, such analysis provides useful information to an organization.

The ratio of fixed assets to total assets does not show the profitability analysis as it does not use any output or sales.

The ratio of fixed assets to total assets does not show the solvency analysis as the solvency deals with the debts of the company.

The ratio of fixed assets to total assets does not show the horizontal analysis as it does not shows any comparison with the previous data.

The ratio of fixed assets to total assets shows the vertical analysis as show the percentages of fixed assets in comparison to total assets.

Ans:

The ratio of fixed assets to total assets shows the vertical analysis.