Exam 2: Introduction to Financial Statement Analysis

Which of the following is NOT one of the ways that the Sarbanes-Oxley Act sought to improve the accuracy of information given to both boards and shareholders?

Price-earnings ratios tend to be high for fast-growing firms.

Gross profit is calculated as ________.

How can we cross check the statement of cash flows?

Which of the following is NOT one of the financial statements that must be produced by a public company?

Income Statement for Xenon Manufacturing: Consider the above Income Statement for Xenon Manufacturing. All values are in millions of dollars. If Xenon Manufacturing has 20 million shares outstanding, what is its EPS in 2008?

A software company acquires a smaller company in order to acquire the patents that it holds. Where will the cost of this acquisition be recorded on the statement of cash flows?

A 30-year mortgage loan is a ________.

Use the table for the question(s)below. -If the above balance sheet is for a retail company, what indications about this company would best be drawn from the changes in the balance sheet between 2007 and 2008?

In general, a successful firm will have a market-to-book ratio that is substantially greater than 1.

Which of the following is the LEAST likely explanation for a firm's high ROE?

In the United States, publicly traded companies can choose whether or not they wish to release periodic financial statements.

WorldCom classified $3.85 billion in operating expenses as long-term investments. How would this make WorldCom's financial statements more attractive to investors?

Use the table for the question(s)below. -If the above balance sheet is for a retail company, what indications about this company would best be drawn from the changes in stockholders' equity between 2007 and 2008?

Luther Corporation Consolidated Balance Sheet December 31, 2006 and 2005 (in $ millions) Refer to the balance sheet above. The change in Luther's quick ratio from 2005 to 2006 is closest to ________.

Which of the following firms would be expected to have a high ROE?

The third party who checks annual financial statements to ensure that they are prepared according to Generally Accepted Accounting Principles (GAAP)and verifies that the information reported is reliable is the ________.

Which of the following statements regarding the income statement is INCORRECT?

Luther Corporation Consolidated Income Statement Year ended December 31 (in $millions) -Refer to the income statement above. Luther's earnings before interest, taxes, depreciation, and amortization (EBITDA)for the year ending December 31, 2005 is closest to ________.

Company A has current assets of $42 billion and current liabilities of $41 billion. Company B has current assets of $2.7 billion and current liabilities of $1.8 billion. Which of the following statements is correct, based on this information?