Financial Statements Analysis EOCQ

Question 1

Ratios are an input into which step in the financial statement analysis framework?

• process data
• collect input data
• analyze/ interpret the processed data

Answer 1

analyze/ interpret the processed data

Question 2

An independent audit report is most likely to provide:

• absolute assurance about the acc the financial statements
• reasonable assurance that the financial statements are fairly presented
• a qualified opinion with respect to the transparency of the financial statements.

Answer 2

• reasonable assurance that the financial statements are fairly presented

Question 3

Interim financial reports released by a company are most likely to be:

• Monthly
  -unaudited
• unqualified

Answer 3

-unaudited

This is something like a 10Q

Question 4

Wich statement is most accurate? a common size income statement:

restates each line item of the income statement as a % of net income

allows an analyst to conduct cross-sectional analysis by removing the effect of company size

standardizes each line item of the income statement by fails to help an analyst identify differences in companies’ strategies

Answer 4

allows an analyst to conduct cross-sectional analysis by removing the effect of company size

Question 5

All of the following are current assets except:

-cash
-goodwill
-inventories

Answer 5

-goodwill

Question 6

The inital measurement of goodwill is most likely affected by:

-an acquisition’s purchase price

• the acquired company’s book value

-the fair value of the acquirer’s assets and liabilities

Answer 6

-an acquisition’s purchase price

Question 7

For financial assets classified as available for sale, how are unrealized gains and losses reflected in shareholders equity?

• They are not recognized

-They flow through retained earnings

• they are component of accumulated other comprehensive income

Answer 7

they are component of accumulated other comprehensive income

Question 8

For financial assets classified as held to maturity, how are unrealized gains and losses reflected in shareholders’ equity?

-They are not recognized

• they flow through retained earnings
• They are a component of accumulated other comprehensive income

Answer 8

-They are not recognized

unrealized gains = are change in value

Question 9

The most stringent test of a company’s liquidity is it’s?

• cash ratio
• quick ratio
• current ratio

Answer 9

• cash ratio

This is only cash and marketable security’s

Question 10

An investor worried about a company’s long term sovency would most likely examine its

• Current ratio
• return on equity
• debit - to -equity ratio

Answer 10

• debit - to -equity ratio

-Current ratio (short term)

• return on equity (profitability)
• debit - to -equity ratio (long -term solvency)

Question 11

How do you calculate the quick ratio for a company?

Answer 11

Cash and cash equivalents + Marketable Securities+ Accounts receivable, net = Quick Ratio