Exam 19: Analysis and Interpretation of Financial Statements

Which of the following ratios measure the relationship between debt and equity? I. The debt ratio II. The current ratio III. The equity (proprietorship) ratio IV. The leverage ratio (total assets/total equity)

Which P/E ratios and earnings yields do not match?

Which of the following businesses would be expected to have the fastest inventory turnover?

Which of the following are limitations of financial analysis? I The past is an imperfect guide to the future. II Effects of inflation are not considered. III Changes in accounting policies are not highlighted. IV Use of different accounting methods across entities makes comparability difficult.

The debt ratio measures:

The following ratios are indicators of profitability except for:

The proportion of borrowed funds compared to equity is a measure of:

Which statement about capital market research and financial statement analysis is correct?

Aster Limited has a current ratio of 1.75 to 1 and current liabilities of $20 000. If Aster Limited's inventory is $8 000 the quick ratio is:

The formula for the profit margin ratio is:

Besides the information in annual reports, which of the following are sources of financial information about companies that are useful for analysing their performance and financial position? I. The Internet II. The Stock Exchange III. Financial newspapers and journals IV. Stock brokers V. Information on competitors

Which of the following statements relating to the debt ratio of a company is incorrect?

_________________statements are those financial statements in which each item is stated as a percentage of a specific base item in the same statement.

If an entity is able to earn more on borrowings than the cost of those borrowings the return on equity will:

Which of the following statements is incorrect?

Cash flows from operating activities divided by (repayments of long-term borrowings + assets acquired + dividends paid) is the formula for:

To be useful for decision making, absolute dollar amounts in financial statements need to be compared with other information. Which of the following are possible comparisons? I. Prior year results II. Current year sales, total assets etc. III. Results of similar businesses or industry averages

Trends in ratios that measure the relationship between debt and equity provide information about which (if any) of the following? I. Long term stability II. Degree of risk in using debt financing III. Margin of safety to creditors in the event of liquidation

An increase in the inventory turnover ratio is normally considered to be favourable but could be unfavourable if it means:

Richmond Co performed a trend analysis at the end of the financial period. Which of the following changes appears to be the most significant in requiring further investigation?