Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

Edward I.Altman developed a multivariate model to predict bankruptcy.The model produces an overall discriminant score called a Z value.Which of the following statements is probably an unreasonable statement relating to the Z value?

Accepted Answer

A) The sales generating ability of the firm's assets is one of the important considerations in the Z value. 
B) The lack of a market value for a company's stock will reduce the significance of the Z value approach. 
C) Total assets is an important consideration in the Z value computation. 
D) Cumulative profitability over time is considered in the Z value computation. 
E) A Z score of 2.00 or below indicates a very healthy company. 
A) The sales generating ability of the firm's assets is one of the important considerations in the Z value. 
B) The lack of a market value for a company's stock will reduce the significance of the Z value approach. 
C) Total assets is an important consideration in the Z value computation. 
D) Cumulative profitability over time is considered in the Z value computation. 
E) A Z score of 2.00 or below indicates a very healthy company.

Question 4

The straight-line depreciation method recognizes depreciation in equal amounts over each year of the life of the asset.Therefore,the straight-line depreciation method is a conservative depreciation method.

Accepted Answer

A) True 
 B)False

Question 5

A decline in the acid-test ratio indicates a reduced ability to pay current liabilities with funds from the sale of inventory.

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

Which of the following is not a multiple approach to valuation?

Accepted Answer

A) Discounted cash flow 
B) Price-to-earnings (P
E)  
C) Price-to-book 
D) Price-to-operating cash flow 
E) Price-to-sales 
A) Discounted cash flow 
B) Price-to-earnings (P
E)  
C) Price-to-book 
D) Price-to-operating cash flow 
E) Price-to-sales

Question 8

The information on a firm's lifo reserve can be used to improve the analysis of inventory,liquidity in general,and the debt position.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

Ideally,a proposed comprehensive budget should be compared with financial ratios that have been agreed upon as part of the firm's corporate objectives.

Accepted Answer

A) True 
 B)False

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

Presently,no regulatory agency,such as the Securities and Exchange Commission or the Financial Accounting Standards Board,accepts responsibility for determining either the content of financial ratios or the format of presentation in annual reports.

Accepted Answer

A) True 
 B)False

Question 14

Substantial research and development will result in more conservative earnings.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following variables indicates a measure of cumulative profitability over time?

Accepted Answer

A) Retained earnings (balance sheet)/total assets 
B) Earnings before interest and taxes/total assets 
C) Working capital/total assets 
D) Market value of equity/book value of total debt 
E) Sales/total assets 
A) Retained earnings (balance sheet)/total assets 
B) Earnings before interest and taxes/total assets 
C) Working capital/total assets 
D) Market value of equity/book value of total debt 
E) Sales/total assets

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

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

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

Question 19

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 20

The completed-contract method recognizes all income when the contract is completed,while the percentage-of-completion method recognizes income as work progresses on the contract.The completed-contract method is the conservative method.

Accepted Answer

A) True 
 B)False

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

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

Edward I.Altman developed a multivariate model to predict bankruptcy.The model produces an overall discriminant score called a Z value.Which of the following statements is probably an unreasonable statement relating to the Z value?

The straight-line depreciation method recognizes depreciation in equal amounts over each year of the life of the asset.Therefore,the straight-line depreciation method is a conservative depreciation method.

A decline in the acid-test ratio indicates a reduced ability to pay current liabilities with funds from the sale of inventory.

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?

Which of the following is not a multiple approach to valuation?

The information on a firm's lifo reserve can be used to improve the analysis of inventory,liquidity in general,and the debt position.

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.

Ideally,a proposed comprehensive budget should be compared with financial ratios that have been agreed upon as part of the firm's corporate objectives.

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.

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

Presently,no regulatory agency,such as the Securities and Exchange Commission or the Financial Accounting Standards Board,accepts responsibility for determining either the content of financial ratios or the format of presentation in annual reports.

Substantial research and development will result in more conservative earnings.

Which of the following variables indicates a measure of cumulative profitability over time?

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

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

Which of the following is not a reasonable matching? I. inventory LIFO II. fixed assets accelerated depreciation III. intangible assets short period of time for amortization IV. pensions short period of time to amortize prior service cost V receivables direct write-off method

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

The completed-contract method recognizes all income when the contract is completed,while the percentage-of-completion method recognizes income as work progresses on the contract.The completed-contract method is the conservative method.

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

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

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

Edward I.Altman developed a multivariate model to predict bankruptcy.The model produces an overall discriminant score called a Z value.Which of the following statements is probably an unreasonable statement relating to the Z value?

The straight-line depreciation method recognizes depreciation in equal amounts over each year of the life of the asset.Therefore,the straight-line depreciation method is a conservative depreciation method.

A decline in the acid-test ratio indicates a reduced ability to pay current liabilities with funds from the sale of inventory.

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?

Which of the following is not a multiple approach to valuation?

The information on a firm's lifo reserve can be used to improve the analysis of inventory,liquidity in general,and the debt position.

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.

Ideally,a proposed comprehensive budget should be compared with financial ratios that have been agreed upon as part of the firm's corporate objectives.

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.

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

Presently,no regulatory agency,such as the Securities and Exchange Commission or the Financial Accounting Standards Board,accepts responsibility for determining either the content of financial ratios or the format of presentation in annual reports.

Substantial research and development will result in more conservative earnings.

Which of the following variables indicates a measure of cumulative profitability over time?

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

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

Which of the following is not a reasonable matching? I. inventory LIFO II. fixed assets accelerated depreciation III. intangible assets short period of time for amortization IV. pensions short period of time to amortize prior service cost V receivables direct write-off method

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

The completed-contract method recognizes all income when the contract is completed,while the percentage-of-completion method recognizes income as work progresses on the contract.The completed-contract method is the conservative method.

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