Question 1

Beaver did a study that indicated that failed firms have less cash but more inventory one year before failure than do similar firms that do not fail.

Accepted Answer

A) True 
 B)False  False

Question 2

It is likely that particular attention should be paid to cash, accounts receivable, and inventory when forecasting financial failure.

Accepted Answer

A) True 
 B)False  True

Question 3

There is a major effort to explain financial results by the disclosure of financial ratios in annual reports.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following is not a discounted cash flow model for valuation?

Accepted Answer

A) Free cash flow 
B) Dividend discount model 
C) Discounted cash flow 
D) Discounted abnormal earnings 
E) All of the answers are discounted cash flow models. 
A) Free cash flow 
B) Dividend discount model 
C) Discounted cash flow 
D) Discounted abnormal earnings 
E) All of the answers are discounted cash flow models.

Question 5

The financial literature and valuation books strongly support the use of multiperiod discounted valuation model either in terms of earnings or cash flow.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following ratios is rated to be a primary measure of liquidity and the highest significance rating of the liquidity ratios according to commercial loan departments?

Accepted Answer

A) Debt/Equity 
B) Current Ratio 
C) Degree of Financial Leverage 
D) Inventory Turnover in Days 
E) Accounts Receivable Turnover in Days 
A) Debt/Equity 
B) Current Ratio 
C) Degree of Financial Leverage 
D) Inventory Turnover in Days 
E) Accounts Receivable Turnover in Days

Question 7

It is logical that there would be a high correlation between ratios that are rated to be highly significant and ratios that are included in corporate objectives.

Accepted Answer

A) True 
 B)False

Question 8

An auditor can use financial ratios in analytical review procedures.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a reasonable matching? $$\begin{array} { l l l } 
& \text { Item } & \text { Related Conservative Policy } \
\text { I. } & \text { inventory } & \text { LIFO } \
\text { II. } & \text { fixed assets } & \text { accelerated depreciation } \
\text { III. } & \text { intangible assets } & \text { short period of time for amortization } \
\text { IV. } & \text { pensions } & \text { short period of time to amortize prior service cost } \
\text { V. } & \text { receivables } & \text { direct write-off method }
\end{array}$$

Accepted Answer

A) I 
B) II 
C) III 
D) IV 
E) V 
A) I 
B) II 
C) III 
D) IV 
E) V

Question 10

The straight-line depreciation method is a conservative depreciation method.

Accepted Answer

A) True 
 B)False

Question 11

Which financial ratio appears most frequently in loan agreements according to commercial loan officers?

Accepted Answer

A) Quick Ratio 
B) Cash Flow/Total Debt 
C) Debt/Equity 
D) Times Interest Earned 
E) Cash ratio 
A) Quick Ratio 
B) Cash Flow/Total Debt 
C) Debt/Equity 
D) Times Interest Earned 
E) Cash ratio

Question 12

Accounting policies that result in the fastest reporting of income are the most conservative.

Accepted Answer

A) True 
 B)False

Question 13

Analytical review procedures may be performed at various times within the audit.

Accepted Answer

A) True 
 B)False

Question 14

Most of the ratios given a high significance rating by chartered financial analysts have a primary measure of profitability.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following depreciation methods is considered to be the least conservative?

Accepted Answer

A) Sum-of-the-Years' Digits 
B) Declining-Balance Method 
C) Straight-Line 
D) each method is equally conservative 
E) Sum-of-the-Years' Digits and Declining-Balance Method are equally conservative 
A) Sum-of-the-Years' Digits 
B) Declining-Balance Method 
C) Straight-Line 
D) each method is equally conservative 
E) Sum-of-the-Years' Digits and Declining-Balance Method are equally conservative

Question 16

Which of the following ratios is a primary measure of liquidity according to the corporate controller survey?

Accepted Answer

A) Earnings per Share 
B) Debt/Equity Ratio 
C) Return on Equity after Tax 
D) Current Ratio 
E) None of the answers are correct 
A) Earnings per Share 
B) Debt/Equity Ratio 
C) Return on Equity after Tax 
D) Current Ratio 
E) None of the answers are correct

Question 17

Which of the following ratios appears most frequently in annual reports?

Accepted Answer

A) Earnings per Share 
B) Return on Equity 
C) Profit Margin 
D) Effective Tax Rate 
E) Debt/Equity 
A) Earnings per Share 
B) Return on Equity 
C) Profit Margin 
D) Effective Tax Rate 
E) Debt/Equity

Question 18

With the Altman model, the higher the Z score, the more likely the firm will go bankrupt.

Accepted Answer

A) True 
 B)False

Question 19

A univariate model to predict financial failure uses a single variable in a prediction model.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is not true?

Accepted Answer

A) The depreciation method and the period of time selected to depreciate an asset can have a significant influence on income. 
B) There are many depreciation methods. 
C) The depreciation methods that recognize a large amount of depreciation in the later years of an asset's life are conservative. 
D) The straight-line depreciation method recognizes depreciation in equal amounts over each year of the life of the asset. 
E) There is sometimes a material difference in the lives used for depreciation between firms. 
A) The depreciation method and the period of time selected to depreciate an asset can have a significant influence on income. 
B) There are many depreciation methods. 
C) The depreciation methods that recognize a large amount of depreciation in the later years of an asset's life are conservative. 
D) The straight-line depreciation method recognizes depreciation in equal amounts over each year of the life of the asset. 
E) There is sometimes a material difference in the lives used for depreciation between firms.

Beaver did a study that indicated that failed firms have less cash but more inventory one year before failure than do similar firms that do not fail.

It is likely that particular attention should be paid to cash, accounts receivable, and inventory when forecasting financial failure.

There is a major effort to explain financial results by the disclosure of financial ratios in annual reports.

Which of the following is not a discounted cash flow model for valuation?

The financial literature and valuation books strongly support the use of multiperiod discounted valuation model either in terms of earnings or cash flow.

Which of the following ratios is rated to be a primary measure of liquidity and the highest significance rating of the liquidity ratios according to commercial loan departments?

It is logical that there would be a high correlation between ratios that are rated to be highly significant and ratios that are included in corporate objectives.

An auditor can use financial ratios in analytical review procedures.

The straight-line depreciation method is a conservative depreciation method.

Which financial ratio appears most frequently in loan agreements according to commercial loan officers?

Accounting policies that result in the fastest reporting of income are the most conservative.

Analytical review procedures may be performed at various times within the audit.

Most of the ratios given a high significance rating by chartered financial analysts have a primary measure of profitability.

Which of the following depreciation methods is considered to be the least conservative?

Which of the following ratios is a primary measure of liquidity according to the corporate controller survey?

Which of the following ratios appears most frequently in annual reports?

With the Altman model, the higher the Z score, the more likely the firm will go bankrupt.

A univariate model to predict financial failure uses a single variable in a prediction model.

Which of the following statements is not true?

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets; Related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 11: Expanded Analysis

Beaver did a study that indicated that failed firms have less cash but more inventory one year before failure than do similar firms that do not fail.

It is likely that particular attention should be paid to cash, accounts receivable, and inventory when forecasting financial failure.

There is a major effort to explain financial results by the disclosure of financial ratios in annual reports.

Which of the following is not a discounted cash flow model for valuation?

The financial literature and valuation books strongly support the use of multiperiod discounted valuation model either in terms of earnings or cash flow.

Which of the following ratios is rated to be a primary measure of liquidity and the highest significance rating of the liquidity ratios according to commercial loan departments?

It is logical that there would be a high correlation between ratios that are rated to be highly significant and ratios that are included in corporate objectives.

An auditor can use financial ratios in analytical review procedures.

The straight-line depreciation method is a conservative depreciation method.

Which financial ratio appears most frequently in loan agreements according to commercial loan officers?

Accounting policies that result in the fastest reporting of income are the most conservative.

Analytical review procedures may be performed at various times within the audit.

Most of the ratios given a high significance rating by chartered financial analysts have a primary measure of profitability.

Which of the following depreciation methods is considered to be the least conservative?

Which of the following ratios is a primary measure of liquidity according to the corporate controller survey?

Which of the following ratios appears most frequently in annual reports?

With the Altman model, the higher the Z score, the more likely the firm will go bankrupt.

A univariate model to predict financial failure uses a single variable in a prediction model.

Which of the following statements is not true?

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets; Related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters