Exam 1: Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Comparative financial statements for Larson Company,prepared on December 31 are shown below: Income Statement Sales revenue Cost of goods sold Gross profit Operating expenses and interest expense Pretax income Income tax Net income Balance Sheet Cash Accounts receivable (net) Inventoiy Operational assets (net) Current liabilities (no interest) Long-term liabilities ( 10 \% interest) Common stock (par \5 ) Retained earnings 2012 \ 190,000 78,000 22,000 \ 4,000 14,000 40,000 \ 16,000 45,000 30,000 2011 \ 167,000 67,000 14,000 \ 7,000 18,000 34,000 \ 17,000 45,000 30,000 Required: Assume that one-third of sales are on credit and that cash dividends of $3,000 were declared and paid in 2012.Then,complete a percentage change income statement and a percentage change balance sheet for the company,using both amount and percentage changes from 2011 to 2012.

Which of the following is not an activity reported in the Statement of cash Flows?

What is an industry's value chain?

Why is the operating activities section of the statement of cash flows often believed to be the most important part of the statement?

Which of the following is not an expense of a business?

On a common size basis,which of the following assets is normally largest for an electric utility?

Which two organizations are working together to harmonize financial reporting worldwide?

When assessing buyer power using Porter's five forces,which of the following is not consistent with low buyer power?

The third step in financial statement analysis is to assess the quality of the firm's financial statements.Which of the following is a question an analyst should ask when performing this step?

The second step in financial statement analysis is to identify the company strategy.Which of the following is a question an analyst should ask when performing a strategy analysis?

Which financial statement for a business would you look at to determine the company's earnings performance during an accounting period? 

Depreciation is a(n)___________________ added back to net income when preparing the operating activities section of the Statement of Cash Flows.

______________________________ relates to the relative number of buyers and sellers in a particular industry.

An example of an intangible asset is:

Which of the following economic characteristics is consistent with a commercial bank?

The fourth step in financial statement analysis is using the financial statements to analyze the current ____________________,_______________ and ____________________ of the firm.

What is the principal activity of security analysts?

Another important step in financial statement analysis is to assess the quality of a firm's _____________________________ and if necessary adjust them for such characteristics as sustainability or comparability.

The threat of new entrants is measured by whether there are entry barriers,such as capital investment,________________________________________,patents,or regulation that inhibit new entrants.

The ______________________________ sets forth the sequence of activities involved in the creation,manufacture and distribution of its products and services.