Question 1

On a common size basis,which of the following assets is normally largest for a commercial bank?

Accepted Answer

A)  Accounts and Notes Receivable 
B)  Inventory 
C)  Property, Plant and Equipment 
D)  Cash and Marketable Securities

Question 2

Use the current asset section of the balance sheets of the El Paso Company as of January 31,2012 and 2011 presented below to answer the questions that follow
 $\begin{array}{lrr}
&2012&2011\
\text { Cash and cash equivalents } & \$ 75,000 & \$ 58,800 \
\text { Trade accounts receivable, net } & 157,500 & 193,200 \
\text { Inventory } & 208,200 & 253,400 \
\text { Other current assets } & 18,400 & 15,500 \
\quad \text { Total current assets } & \$ 459,100 & \$ 520,900 \
\text { Total assets } & \$ 2,650,000 & \$ 3,430,000
\end{array}$

Required:
(a) In the spaces provided below, complete a Percentage Change analysis of the current asset section of E1 Paso Company's balance sheet for 2012, using the following format to provide your answers for the amount of dollar change and the amount of percentage change, rounding $" \%$ Change" to one decimal place, e.g., $8.3 \%$.
$\underline{\text { Accounts }}$  $\underline { \text { \$Change } }$   $\underline{\% \text { Change }}$

(b) Provide a short evaluation of this analysis. 
.

Accepted Answer

The answer of Use the current asset section of the...

Question 3

The following steps make up the steps in financial statement :
1.Identify the strategies the firm pursues to gain and sustain a competitive advantage.
2.Analyze the current profitability and risk of the firm using information in the financial statements.
3.Value the firm.
4.Identify the economic characteristics and competitive dynamics of the industry in
Which a particular firm participates.
5.Assess the quality of the firm's financial statements and,if necessary,adjust them for
Such desirable characteristics as sustainability or comparability.
6.Prepare forecasted financial statements.
Which of the following is the proper order for these interrelated sequential steps?

Accepted Answer

A)  4,1,5,2,6,3 
B)  1,2,3,4,5,6 
C)  4,6,2,5,1,3 
D)  1,4,2,5,3,6

Question 4

___________________________________ financial statements are helpful in highlighting the relative magnitude of changes in financial statement data from year to year.

Accepted Answer

The answer of ___________________________________ financial statements are helpful in highlighting...

Question 5

How easily can new firms enter a market is a question one might ask when assessing _____________________________________________.

Accepted Answer

The answer of How easily can new firms enter a...

Question 6

Which forces typically represent horizontal competition in a value chain?

Accepted Answer

A)  Rivalry among existing firms and supplier power. 
B)  Potential entry and buyer power. 
C)  Substitutes and potential entry. 
D)  Buyer power and supplier power.

Question 7

The Second step in financial statement analysis requires businesses to analyze strategies that will __________________________ itself from the firms' competitors.

Accepted Answer

The answer of The Second step in financial statement analysis...

Question 8

Many market participants argue that financial markets are efficient and that financial statement users cannot routinely analyze financial statements to find mispriced securities.This view would lead some to suggest that there is little value to financial statement analysis.
Required:
Provide a discussion of the role of financial statement analysis in an efficient capital market and reasons why financial statement analysis is still valuable.

Accepted Answer

The answer of Many market participants argue that financial markets...

Question 9

Under the Sarbanes-Oxley Act ____________________ assumes responsibility for establishing and maintaining adequate internal control structure and procedures.

Accepted Answer

The answer of Under the Sarbanes-Oxley Act ____________________ assumes responsibility...

Question 10

Extraordinary gains and losses arise from events that have all the following characteristics except:

Accepted Answer

A)  They are unusual given the nature of the firm's activity. 
B)  They are nonrecurring. 
C)  They are material in amount. 
D)  They result from terminated involvement in a line of business.

Question 11

How easily can customers switch to substitute products is a question one might ask when assessing the ___________________________________.

Accepted Answer

The answer of How easily can customers switch to substitute...

Question 12

Which of the following economic characteristics is consistent with a grocery store chain?

Accepted Answer

A)  Minimal competition 
B)  Extensive competition 
C)  High net income to sales 
D)  Differentiated product

Question 13

The cash basis method of accounting can be best described as:

Accepted Answer

A)  The recording of transactions and adjustments so that debits equal credits. 
B)  The method that equates assets with liabilities and owners' equity. 
C)  The method that recognizes revenue when money is received and expenses when money is paid. 
D)  The method that matches incurred expenses with related revenues when they are earned.

Question 14

Which SEC form may be the best place to start learning about the economics of an industry and the particular strategy a firm has selected for competing in the industry?

Accepted Answer

A)  Form 8-K 
B)  Form 10-K 
C)  Form MD&A 
D)  Form FSAP

Question 15

Labor contracts and purchase order commitments are examples of ____________________ contracts.

Accepted Answer

The answer of Labor contracts and purchase order commitments are...

Question 16

Which of the following is not a characteristic of an extraordinary item?

Accepted Answer

A)  Material in amount. 
B)  Nonrecurring. 
C)  Unusual given the nature of the firm's activities. 
D)  Requires a cash outflow.

Question 17

Which of the following would not inhibit new entrants into a market?

Accepted Answer

A)  Existing technological expertise. 
B)  Large required capital investment. 
C)  Lack of rivalry among current participants. 
D)  Existing patented technology.

Question 18

When a company sells a subsidiary or a product line on what financial statement is it reported and how is it reported?

Accepted Answer

The answer of When a company sells a subsidiary or...

Question 19

Describe what is meant by income from continuing operations?

Accepted Answer

The answer of Describe what is meant by income from...

Question 20

Basic EPS is calculated as net income minus _____________________________________________ divided by the weighted average number of shares outstanding.

Accepted Answer

The answer of Basic EPS is calculated as net income...

Exam 1: Overview of Financial Reporting, Financial Statement Analysis, and Valuation