Question 1

The audit report guarantees the accuracy of financial information contained in the financial statements.

Accepted Answer

A) True 
 B)False  False

Question 2

Place the following steps involved in financial statement analysis in the proper order: I. Determine the purpose and context of the analysis
II. Develop conclusions and recommendations
III. Collect information needed for the analysis
IV. Analyze and interpret the metrics
V. Prepare common-size analysis and calculate ratios

Accepted Answer

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

Question 3

The analysis of financial statements to assist in predicting future results is an example of

Accepted Answer

A)  historical analysis. 
B)  retrospective analysis. 
C)  retroactive analysis. 
D)  prospective analysis. 
A)  historical analysis. 
B)  retrospective analysis. 
C)  retroactive analysis. 
D)  prospective analysis. B

Question 4

Prospective analysis is known as a forward-looking analysis.

Accepted Answer

A) True 
 B)False

Question 5

Consider the following income statement data for Odem Inc.:  
-The common-size percentage for selling and administration costs in 2016 was

Accepted Answer

A)  21.2%. 
B)  23.1%. 
C)  43.5%. 
D)  77.0%. 
A)  21.2%. 
B)  23.1%. 
C)  43.5%. 
D)  77.0%.

Question 6

It is important that the conclusion of an analysis differentiates between factual results and the analysts' opinion.

Accepted Answer

A) True 
 B)False

Question 7

Given the following data: sales $1,500,000; gross profit $640,000; net income $40,000 and income tax expense $35,000. What is the common-size percentage for the cost of sales?

Accepted Answer

A)  3.0% 
B)  37.7% 
C)  42.7% 
D)  57.3% 
A)  3.0% 
B)  37.7% 
C)  42.7% 
D)  57.3%

Question 8

Which ratio can help estimate the number of years required to pay off a company's total debt?

Accepted Answer

A)  total debt ÷ net income 
B)  net income ÷ operating cash flow 
C)  total debt ÷ current assets 
D)  cash flows for operations ÷ total liabilities 
A)  total debt ÷ net income 
B)  net income ÷ operating cash flow 
C)  total debt ÷ current assets 
D)  cash flows for operations ÷ total liabilities

Question 9

Ratios are more conclusive than attention directing.

Accepted Answer

A) True 
 B)False

Question 10

Which of the return on investment ratios would be of most interest to the management of a firm?

Accepted Answer

A)  return on assets 
B)  return on debt 
C)  return on equity 
D)  return on profits 
A)  return on assets 
B)  return on debt 
C)  return on equity 
D)  return on profits

Question 11

Use the following information for questions 80-81.
The following data was taken from the accounting records of Whalen Corporation:  
-The return on assets for 2016 is

Accepted Answer

A)  15.6%. 
B)  16.5%. 
C)  17.4%. 
D)  18.5%. 
A)  15.6%. 
B)  16.5%. 
C)  17.4%. 
D)  18.5%.

Question 12

EBITDAR is best described as

Accepted Answer

A)  earnings before income, taxes, depreciation, acquisitions and restructuring. 
B)  earnings before interest, taxes, depreciation, acquisitions and restructuring. 
C)  earnings before income, taxes, discounts, acquisitions and restructuring. 
D)  equity before interest, taxes, depreciation, acquisitions and restructuring. 
A)  earnings before income, taxes, depreciation, acquisitions and restructuring. 
B)  earnings before interest, taxes, depreciation, acquisitions and restructuring. 
C)  earnings before income, taxes, discounts, acquisitions and restructuring. 
D)  equity before interest, taxes, depreciation, acquisitions and restructuring.

Question 13

An analyst is comparing two companies, a retail bookstore chain and an on-line bookstore. Which of the following activity ratios is most likely significantly higher for the on-line bookstore?

Accepted Answer

A)  accounts receivable turnover 
B)  inventory turnover 
C)  accounts payable turnover 
D)  gross margin 
A)  accounts receivable turnover 
B)  inventory turnover 
C)  accounts payable turnover 
D)  gross margin

Question 14

Historical results CANNOT be used as a foundation for predicting future outcomes.

Accepted Answer

A) True 
 B)False

Question 15

A banker assessing a loan application and an equity analyst making an investment decision would perform the same type of analysis of a company.

Accepted Answer

A) True 
 B)False

Question 16

Cross-sectional analysis compares data from one company with those of another company over many periods.

Accepted Answer

A) True 
 B)False

Question 17

All of the following measure activity except for

Accepted Answer

A)  accounts receivable turnover. 
B)  inventory turnover. 
C)  equity turnover. 
D)  accounts payable turnover. 
A)  accounts receivable turnover. 
B)  inventory turnover. 
C)  equity turnover. 
D)  accounts payable turnover.

Question 18

Why is the audit report important in the analysis of a company?

Accepted Answer

A)  It guarantees the accuracy of the information in the financial statements. 
B)  It guarantees the accuracy of the internal controls of the company. 
C)  The auditors are hired by management to assess the appropriateness of the accounting policies chosen. 
D)  The auditors are an independent third party expressing an opinion on the fairness of the financial statements. 
A)  It guarantees the accuracy of the information in the financial statements. 
B)  It guarantees the accuracy of the internal controls of the company. 
C)  The auditors are hired by management to assess the appropriateness of the accounting policies chosen. 
D)  The auditors are an independent third party expressing an opinion on the fairness of the financial statements.

Question 19

An analyst is comparing two companies, a retail bookstore chain and an on-line bookstore. Which of the following liquidity ratios is most likely significantly lower for the retail bookstore?

Accepted Answer

A)  quick ratio 
B)  current ratio 
C)  working capital 
D)  operating cash flow to short term debt 
A)  quick ratio 
B)  current ratio 
C)  working capital 
D)  operating cash flow to short term debt

Question 20

Fully diluted earnings per share is a worst case scenario.

Accepted Answer

A) True 
 B)False

The audit report guarantees the accuracy of financial information contained in the financial statements.

The analysis of financial statements to assist in predicting future results is an example of

Prospective analysis is known as a forward-looking analysis.

Consider the following income statement data for Odem Inc.: -The common-size percentage for selling and administration costs in 2016 was

It is important that the conclusion of an analysis differentiates between factual results and the analysts' opinion.

Given the following data: sales $1,500,000; gross profit $640,000; net income $40,000 and income tax expense $35,000. What is the common-size percentage for the cost of sales?

Which ratio can help estimate the number of years required to pay off a company's total debt?

Ratios are more conclusive than attention directing.

Which of the return on investment ratios would be of most interest to the management of a firm?

Use the following information for questions 80-81. The following data was taken from the accounting records of Whalen Corporation: -The return on assets for 2016 is

EBITDAR is best described as

An analyst is comparing two companies, a retail bookstore chain and an on-line bookstore. Which of the following activity ratios is most likely significantly higher for the on-line bookstore?

Historical results CANNOT be used as a foundation for predicting future outcomes.

A banker assessing a loan application and an equity analyst making an investment decision would perform the same type of analysis of a company.

Cross-sectional analysis compares data from one company with those of another company over many periods.

All of the following measure activity except for

Why is the audit report important in the analysis of a company?

An analyst is comparing two companies, a retail bookstore chain and an on-line bookstore. Which of the following liquidity ratios is most likely significantly lower for the retail bookstore?

Fully diluted earnings per share is a worst case scenario.

Overview of Corporate Financial Reporting

Nalyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Incom

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Inventory

Long-Term Assets

Long-Term Liabilities

Shareholders Equity

Filters

Exam 12: Financial Statement Analysis

The audit report guarantees the accuracy of financial information contained in the financial statements.

The analysis of financial statements to assist in predicting future results is an example of

Prospective analysis is known as a forward-looking analysis.

Consider the following income statement data for Odem Inc.: -The common-size percentage for selling and administration costs in 2016 was

It is important that the conclusion of an analysis differentiates between factual results and the analysts' opinion.

Given the following data: sales $1,500,000; gross profit $640,000; net income $40,000 and income tax expense $35,000. What is the common-size percentage for the cost of sales?

Which ratio can help estimate the number of years required to pay off a company's total debt?

Ratios are more conclusive than attention directing.

Which of the return on investment ratios would be of most interest to the management of a firm?

Use the following information for questions 80-81. The following data was taken from the accounting records of Whalen Corporation: -The return on assets for 2016 is

EBITDAR is best described as

An analyst is comparing two companies, a retail bookstore chain and an on-line bookstore. Which of the following activity ratios is most likely significantly higher for the on-line bookstore?

Historical results CANNOT be used as a foundation for predicting future outcomes.

A banker assessing a loan application and an equity analyst making an investment decision would perform the same type of analysis of a company.

Cross-sectional analysis compares data from one company with those of another company over many periods.

All of the following measure activity except for

Why is the audit report important in the analysis of a company?

An analyst is comparing two companies, a retail bookstore chain and an on-line bookstore. Which of the following liquidity ratios is most likely significantly lower for the retail bookstore?

Fully diluted earnings per share is a worst case scenario.

Overview of Corporate Financial Reporting

Nalyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Incom

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Inventory

Long-Term Assets

Long-Term Liabilities

Shareholders Equity

Filters