Question 1

What is the role of an auditor in financial statement analysis?

Accepted Answer

Key points:
1. To ensure that the annual

Question 2

Use the table for the question(s) below.
Consider the following balance sheet:
    
-Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding. Its excess cash in 2009 is $23.4. If EBIT is 41.2 and tax rate is 35%, its Return on Invested Capital in 2009 is closest to:

Accepted Answer

A)  0.104 
B)  0.064 
C)  0.038 
D)  0.068 
A)  0.104 
B)  0.064 
C)  0.038 
D)  0.068

Question 3

Which of the following is NOT a section on the cash flow statement?

Accepted Answer

A)  Income generating activities 
B)  Investing activities 
C)  Operating activities 
D)  Financing activities 
A)  Income generating activities 
B)  Investing activities 
C)  Operating activities 
D)  Financing activities

Question 4

Use the table for the question(s) below.
Consider the following balance sheet:
    
-Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding. Its Debt -Capital Ratio for 2009 is closest to:

Accepted Answer

A)  0.696 
B)  0.37 
C)  1.89 
D)  0.654 
A)  0.696 
B)  0.37 
C)  1.89 
D)  0.654

Question 5

Use the table for the question(s) below.
Consider the following income statement and other information:
  
-Luther's EBIT coverage ratio for the year ending December 31, 2009 is closest to:

Accepted Answer

A)  1.64 
B)  1.78 
C)  1.98 
D)  2.19 
A)  1.64 
B)  1.78 
C)  1.98 
D)  2.19

Question 6

The Sarbanes-Oxley Act (SOX) was passed by Congress in 2002, in response to:

Accepted Answer

A)  financial scandals, including WorldCom and Enron. 
B)  financial scandals, including Bernie Madoff and AIG. 
C)  financial scandals, including General Motors and Chrysler. 
D)  the Troubled Asset Relief Program (TARP). 
A)  financial scandals, including WorldCom and Enron. 
B)  financial scandals, including Bernie Madoff and AIG. 
C)  financial scandals, including General Motors and Chrysler. 
D)  the Troubled Asset Relief Program (TARP).

Question 7

The Sarbanes-Oxley Act (SOX) stiffened penalties for providing false information by:

Accepted Answer

A)  requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
B)  imposing large compliance costs on small companies. 
C)  requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D)  putting strict limits on the amount of non-audit fees (consulting or otherwise) that an accounting firm can earn from a firm that it audits. 
A)  requiring the CEO and CFO to return bonuses or profits from the sale of stock that are later shown to be due to misstated financial reports. 
B)  imposing large compliance costs on small companies. 
C)  requiring auditing firms to have long-standing relationships with their clients and receive lucrative auditing and consulting fees from them. 
D)  putting strict limits on the amount of non-audit fees (consulting or otherwise) that an accounting firm can earn from a firm that it audits.

Question 8

Dustin's Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago. This reduction in value results in:

Accepted Answer

A)  an impairment charge. 
B)  depreciation expense. 
C)  an operating expense. 
D)  goodwill. 
A)  an impairment charge. 
B)  depreciation expense. 
C)  an operating expense. 
D)  goodwill.

Question 9

Use the table for the question(s) below.
Consider the following income statement and other information:
  
-For the year ending December 31, 2009 Luther's earnings per share are closest to:

Accepted Answer

A)  $0.96 
B)  $1.04 
C)  $1.28 
D)  $1.33 
A)  $0.96 
B)  $1.04 
C)  $1.28 
D)  $1.33

Question 10

Which of the following balance sheet equations is INCORRECT?

Accepted Answer

A)  Assets - Liabilities = Shareholders' Equity 
B)  Assets = Liabilities + Shareholders' Equity 
C)  Assets - Current Liabilities = Long Term Liabilities 
D)  Assets - Current Liabilities = Long Term Liabilities + Shareholders' Equity 
A)  Assets - Liabilities = Shareholders' Equity 
B)  Assets = Liabilities + Shareholders' Equity 
C)  Assets - Current Liabilities = Long Term Liabilities 
D)  Assets - Current Liabilities = Long Term Liabilities + Shareholders' Equity

Question 11

The statement of financial position is also known as the:

Accepted Answer

A)  balance sheet. 
B)  income statement. 
C)  statement of cash flows. 
D)  statement of stockholder's equity. 
A)  balance sheet. 
B)  income statement. 
C)  statement of cash flows. 
D)  statement of stockholder's equity.

Question 12

Use the table for the question(s) below.
Consider the following balance sheet:
    
-Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding. Its book value Debt -Equity Ratio for 2009 is closest to:

Accepted Answer

A)  2.29 
B)  0.31 
C)  1.89 
D)  0.37 
A)  2.29 
B)  0.31 
C)  1.89 
D)  0.37

Question 13

Use the table for the question(s) below.
Consider the following balance sheet:
    
-If on December 31, 2008 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

Exam 2: Introduction to Financial Statement Analysis

What is the role of an auditor in financial statement analysis?

Which of the following is NOT a section on the cash flow statement?

Use the table for the question(s) below. Consider the following balance sheet: -Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding. Its Debt -Capital Ratio for 2009 is closest to:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's EBIT coverage ratio for the year ending December 31, 2009 is closest to:

The Sarbanes-Oxley Act (SOX) was passed by Congress in 2002, in response to:

The Sarbanes-Oxley Act (SOX) stiffened penalties for providing false information by:

Dustin's Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago. This reduction in value results in:

Use the table for the question(s) below. Consider the following income statement and other information: -For the year ending December 31, 2009 Luther's earnings per share are closest to:

Which of the following balance sheet equations is INCORRECT?

The statement of financial position is also known as the:

Use the table for the question(s) below. Consider the following balance sheet: -Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding. Its book value Debt -Equity Ratio for 2009 is closest to:

Use the table for the question(s) below. Consider the following balance sheet: -If on December 31, 2008 Luther has 8 million shares outstanding trading at $15 per share, then what is Luther's market-to-book ratio?

The Corporation

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior 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

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

Filters