Question 1

By comparing a firm's current assets and current liabilities,one can assess whether the firm has sufficient ________ to meet its ________ needs.

Accepted Answer

A)  long-term capital, short-term 
B)  working capital, short-term 
C)  working capital, long-term 
D)  marketable securities, long-term 
A)  long-term capital, short-term 
B)  working capital, short-term 
C)  working capital, long-term 
D)  marketable securities, long-term

Question 2

In the IFRS,in addition to the five financial statements,companies provide ________ with further details on the information provided in the statements.

Accepted Answer

A)  pro forma statements 
B)  statements of cash used and sources 
C)  extensive notes 
D)  ratio analysis 
A)  pro forma statements 
B)  statements of cash used and sources 
C)  extensive notes 
D)  ratio analysis

Question 3

In WorldCom's case,the fraud was to reclassify $3.85 billion in ________ as ________.

Accepted Answer

A)  capital budgeting, short-term investment 
B)  operating expenses, long-term investment 
C)  operating expenses, short-term investment 
D)  capital budgeting, long-term investment 
A)  capital budgeting, short-term investment 
B)  operating expenses, long-term investment 
C)  operating expenses, short-term investment 
D)  capital budgeting, long-term investment

Question 4

In 2002,the United States Congress passed ________ that requires,among other things,that CEO's and CFOs certify the accuracy and appropriateness of their firm's financial statements and increase the penalties against them if the financial statements later prove to be fraudulent.

Accepted Answer

A)  the Sarbanes-Oxley Act 
B)  new American GAAP 
C)  the IFRS 
D)  revised GAAP 
A)  the Sarbanes-Oxley Act 
B)  new American GAAP 
C)  the IFRS 
D)  revised GAAP

Question 5

What are the five financial statements that all public companies are required to produce by IFRS?

Accepted Answer

1.The Balance Sheet
2.The Inco

Question 6

The debt-equity ratio is a common ratio used to assess a firm's ________.

Accepted Answer

A)  liquidity 
B)  return on equity 
C)  leverage 
D)  retained earnings 
A)  liquidity 
B)  return on equity 
C)  leverage 
D)  retained earnings

Question 7

Accounts payable is a

Accepted Answer

A)  long-term liability. 
B)  current asset. 
C)  long-term asset. 
D)  current liability. 
A)  long-term liability. 
B)  current asset. 
C)  long-term asset. 
D)  current liability.

Question 8

Use the table for the question(s) below.
Consider the following income statement and other information:  
-Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2005.

Accepted Answer

ROE = NI / shareholder equity = 10.2 / 6

Question 9

Firms disclose the potential for the dilution from options they have awarded by reporting ________.

Accepted Answer

A)  diluted total earnings before interest and taxes 
B)  diluted earnings per share 
C)  diluted dividend payment 
D)  diluted total earnings 
A)  diluted total earnings before interest and taxes 
B)  diluted earnings per share 
C)  diluted dividend payment 
D)  diluted total earnings

Question 10

As the Bernard Madoff's Ponzi Scheme makes clear,when making an investment decision,it is important not only to review the firm's ________,but also to consider ________ who prepare the statement in the first place.

Accepted Answer

A)  balance sheet, the reliability and reputation of the auditors 
B)  Financial Statements, the reliability and reputation of the government offices 
C)  Financial Statements, the reliability and reputation of the auditors 
D)  Financial Statements, the reliability and reputation of the bookkeepers 
A)  balance sheet, the reliability and reputation of the auditors 
B)  Financial Statements, the reliability and reputation of the government offices 
C)  Financial Statements, the reliability and reputation of the auditors 
D)  Financial Statements, the reliability and reputation of the bookkeepers

Question 11

Use the table for the question(s) below.
Consider the following income statement and other information:  
-If Luther's accounts receivable were $55.5 million in 2006,then calculate Luther's accounts receivable days for 2006.

Accepted Answer

Accounts r

Question 12

Use the table for the question(s) below.
Consider the following balance sheet:    
-Luther's quick ratio for 2005 is closest to:

Accepted Answer

A)  0.77 
B)  1.31 
C)  1.09 
D)  0.92 
A)  0.77 
B)  1.31 
C)  1.09 
D)  0.92

Question 13

Use the table for the question(s) below.
Consider the following income statement and other information:  
-Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2005.

Accepted Answer

ROE = NI / shareholder equity = 10.2 / 6

Question 14

Use the table for the question(s) below.
Consider the following income statement and other information:  
-For the year ending December 31,2006 Luther's earnings per share are closest to:

Accepted Answer

A)  $1.01 
B)  $1.04 
C)  $1.58 
D)  $4.04 
A)  $1.01 
B)  $1.04 
C)  $1.58 
D)  $4.04

Question 15

Gross profit is calculated as:

Accepted Answer

A)  Total sales - cost of sales - selling, general and administrative expenses - depreciation and amortization 
B)  Total sales - cost of sales - selling, general and administrative expenses 
C)  Total sales - cost of sales 
D)  None of the above 
A)  Total sales - cost of sales - selling, general and administrative expenses - depreciation and amortization 
B)  Total sales - cost of sales - selling, general and administrative expenses 
C)  Total sales - cost of sales 
D)  None of the above

Question 16

Which of the following adjustments to net income is NOT correct if you are trying to calculate cash flow from operating activities?

Accepted Answer

A)  Add increases in accounts payable. 
B)  Add back depreciation. 
C)  Add increases in accounts receivable. 
D)  Deduct increases in inventory. 
A)  Add increases in accounts payable. 
B)  Add back depreciation. 
C)  Add increases in accounts receivable. 
D)  Deduct increases in inventory.

Question 17

The P/E ratio is not useful when the firm's ________ are negative.In this case,it is common to look at the firm's ________ relative to sales.

Accepted Answer

A)  operating earnings, enterprise value 
B)  net earnings, enterprise value 
C)  operating earnings, market value 
D)  net earnings, market value 
A)  operating earnings, enterprise value 
B)  net earnings, enterprise value 
C)  operating earnings, market value 
D)  net earnings, market value

Question 18

Canadian publicly accountable companies must follow IFRS in their financial statements for fiscal years beginning ________.

Accepted Answer

A)  January 1st, 2010 
B)  January 1st, 2005 
C)  January 1st, 2016 
D)  January 1st, 2011 
A)  January 1st, 2010 
B)  January 1st, 2005 
C)  January 1st, 2016 
D)  January 1st, 2011

Question 19

Use the table for the question(s) below.
Consider the following balance sheet:    
-If on December 31,2005 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

Accepted Answer

market-to-book = market value

Question 20

Which of the following statements regarding the balance sheet is incorrect?

Accepted Answer

A)  The balance sheet provides a snapshot of the firm's financial position at a given point in time. 
B)  The balance sheet lists the firm's assets and liabilities. 
C)  The balance sheet reports stockholders' equity on the right hand side. 
D)  The balance sheet reports liabilities on the left hand side. 
A)  The balance sheet provides a snapshot of the firm's financial position at a given point in time. 
B)  The balance sheet lists the firm's assets and liabilities. 
C)  The balance sheet reports stockholders' equity on the right hand side. 
D)  The balance sheet reports liabilities on the left hand side.

Exam 2: Introduction to Financial Statement Analysis

By comparing a firm's current assets and current liabilities,one can assess whether the firm has sufficient ________ to meet its ________ needs.

In the IFRS,in addition to the five financial statements,companies provide ________ with further details on the information provided in the statements.

In WorldCom's case,the fraud was to reclassify $3.85 billion in ________ as ________.

In 2002,the United States Congress passed ________ that requires,among other things,that CEO's and CFOs certify the accuracy and appropriateness of their firm's financial statements and increase the penalties against them if the financial statements later prove to be fraudulent.

What are the five financial statements that all public companies are required to produce by IFRS?

The debt-equity ratio is a common ratio used to assess a firm's ________.

Accounts payable is a

Use the table for the question(s) below. Consider the following income statement and other information: -Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2005.

Firms disclose the potential for the dilution from options they have awarded by reporting ________.

As the Bernard Madoff's Ponzi Scheme makes clear,when making an investment decision,it is important not only to review the firm's ________,but also to consider ________ who prepare the statement in the first place.

Use the table for the question(s) below. Consider the following income statement and other information: -If Luther's accounts receivable were $55.5 million in 2006,then calculate Luther's accounts receivable days for 2006.

Use the table for the question(s) below. Consider the following balance sheet: -Luther's quick ratio for 2005 is closest to:

Use the table for the question(s) below. Consider the following income statement and other information: -Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2005.

Use the table for the question(s) below. Consider the following income statement and other information: -For the year ending December 31,2006 Luther's earnings per share are closest to:

Gross profit is calculated as:

Which of the following adjustments to net income is NOT correct if you are trying to calculate cash flow from operating activities?

The P/E ratio is not useful when the firm's ________ are negative.In this case,it is common to look at the firm's ________ relative to sales.

Canadian publicly accountable companies must follow IFRS in their financial statements for fiscal years beginning ________.

Use the table for the question(s) below. Consider the following balance sheet: -If on December 31,2005 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

Which of the following statements regarding the balance sheet is incorrect?

The Corporation

Arbitrage and Financial Decision Making

The Time Value of Money

Interest Rates

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Bonds

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behaviour and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

The Mechanics of Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

Filters

By comparing a firm's current assets and current liabilities,one can assess whether the firm has sufficient to meet its needs.

In WorldCom's case,the fraud was to reclassify $3.85 billion in as .

As the Bernard Madoff's Ponzi Scheme makes clear,when making an investment decision,it is important not only to review the firm's ,but also to consider who prepare the statement in the first place.

The P/E ratio is not useful when the firm's are negative.In this case,it is common to look at the firm's relative to sales.