1 COMM 217 FINAL EXAM UPDATE QUESTIONS AND ANSWERS IN THE LAST PAGE Concordia University MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When are ratios most useful for analysis? A) When compared with ratios for other companies in the industry. B) When used alone. C) When compared with historical ratios of the same company. D) When compared with both historical ratios of the same company and ratios for other companies in the industry. 1) 2) Solvency is of most interest to: A) long -term creditors. B) short -term creditors. C) competitors. D) customers. 2) 3) The primary responsibility for the information in a company's financial statements and related disclosures lies with: A) the CEO and CFO of the company. B) the external auditor. C) the internal auditors. D) the creditors. 3) 4) Why is the audit report important in the analysis of a company? A) The auditors are hired by management to assess the appropriateness of the accounting policies chosen. B) It guarantees the accuracy of the internal controls of the company. C) It guarantees the accuracy of the information in the financial statements. D) The auditors are an independent third party expressing an opinion on the fairness of the financial statements. 4) 5) What type of audit report indicates that the financial statements present fairly the financial position, results of operations and the cash flows for the accounting period? A) An unqualified report B) An adverse opinion C) A disclaimer of opinion D) A qualifi ed report 5) 6) What is the goal of the International Accounting Standards Board? A) To develop rules for listing securities in any market B) To protect the right of each country to develop and maintain its own accounting standards C) T
o h 2 ave worldwide acceptance of a set of international generally accepted accounting principles D) To develop accounting principles to meet the legal and tax needs of countries 6) 3 7) International financial reporting standards are currently developed by which entity A) the IFRS Foundation B) the International Organization of Securities Commissions C) the International Accounting Standards Board D) the Ontario Securities Commission 7) 8) In Canada, generally accepted accounting principles for private enterprises are currently developed by which entity? A) The Accounting Standards Board B) The Securities and Exchange Commission C) The Private Company Accounting Oversight Board D) Ontario Securities Commission 8) 9) Accounting methods, estimates, and assumptions used in preparing financial statements are found A) In the notes to the financial state ments. B) in the auditor's report. C) on the income statement. D) in the management discussion and analysis. 9) 10) Information about material events, opportunities and uncertainties would best be found in 10) A) In the notes to the financial statements. B) in the auditor's report. C) on the income statement. D) in the management discussion and analysis. 11) Information about management and director compensation would best be found A) in the notes to the financial statements B) in the auditor's report C) In the shareholders' information circular D) In the cash flow statement 11) 12) Whether by implementing a strategy of differentiation or one of cost advantage, the common objective of a company is A) positive earnings per share B) maximum leverage C) an ROA above 8% D) maximum return on equity 12) 13) Companies that focus on maintaining high profit margins in order to generate higher returns on equity are most likely employing what type of business strategy? A) Cost advantage B) Earnings capitalization C) Differentiation D) Vertical integration 13) 4 14) Companies that focus on making the most efficient use of assets in order to generate higher returns on equity are most likely employing what type of business strategy? A) Cost advantage B) Earnings capitalization C) Differentiation D) Vertical integration 14) 15) Time series analysis involves examining a company's financial data A) across time periods. B) across account classifications. C) and comparing it with other companies. D) as percentages of net sales or total assets. 15) 16) Which of the following is not an example of a company comparison analysis? A) Comparing growth in sales across different industries B) Determining how the growth in sales from one company differed from that of another company. C) Comparing total sales across companies in the same industry for the past three years. D) Determining the growth in sales for a company over a five -year period. 16) 17) Ratios are useful in explaining the: A) trends within industries B) relationships between financial data C) reasons for financial performance D) differences between companies 17) 18) An analytical tool for comparing two companies of different sizes is A) financial leverage B) short -term liquidity C) common size statements D) Annual reports 18) 19) Review of the financial statements revealed the following for Petrolis Sales Inc. Sales $1,250,000, Net income $37,500, Total assets $650,000, Long -term debt $750,000, Interest expense $65,000 and Cost of goods sold $775,000. When preparing common size financial statements interest expense would be shown as A) 5.2% B) 8.4% C) 10% D) 9.4% 19) 20) What is the common denominator for each item on the income statement when preparing a common size income statement? A) Operating profit B) Net income C) Sales D) Gross profit 20) 21) On a common size income statement, all items are shown as: A) percentages of total assets. B) percentages of gross rev
enu
o h 2 ave worldwide acceptance of a set of international generally accepted accounting principles D) To develop accounting principles to meet the legal and tax needs of countries 6) 3 7) International financial reporting standards are currently developed by which entity A) the IFRS Foundation B) the International Organization of Securities Commissions C) the International Accounting Standards Board D) the Ontario Securities Commission 7) 8) In Canada, generally accepted accounting principles for private enterprises are currently developed by which entity? A) The Accounting Standards Board B) The Securities and Exchange Commission C) The Private Company Accounting Oversight Board D) Ontario Securities Commission 8) 9) Accounting methods, estimates, and assumptions used in preparing financial statements are found A) In the notes to the financial state ments. B) in the auditor's report. C) on the income statement. D) in the management discussion and analysis. 9) 10) Information about material events, opportunities and uncertainties would best be found in 10) A) In the notes to the financial statements. B) in the auditor's report. C) on the income statement. D) in the management discussion and analysis. 11) Information about management and director compensation would best be found A) in the notes to the financial statements B) in the auditor's report C) In the shareholders' information circular D) In the cash flow statement 11) 12) Whether by implementing a strategy of differentiation or one of cost advantage, the common objective of a company is A) positive earnings per share B) maximum leverage C) an ROA above 8% D) maximum return on equity 12) 13) Companies that focus on maintaining high profit margins in order to generate higher returns on equity are most likely employing what type of business strategy? A) Cost advantage B) Earnings capitalization C) Differentiation D) Vertical integration 13) 4 14) Companies that focus on making the most efficient use of assets in order to generate higher returns on equity are most likely employing what type of business strategy? A) Cost advantage B) Earnings capitalization C) Differentiation D) Vertical integration 14) 15) Time series analysis involves examining a company's financial data A) across time periods. B) across account classifications. C) and comparing it with other companies. D) as percentages of net sales or total assets. 15) 16) Which of the following is not an example of a company comparison analysis? A) Comparing growth in sales across different industries B) Determining how the growth in sales from one company differed from that of another company. C) Comparing total sales across companies in the same industry for the past three years. D) Determining the growth in sales for a company over a five -year period. 16) 17) Ratios are useful in explaining the: A) trends within industries B) relationships between financial data C) reasons for financial performance D) differences between companies 17) 18) An analytical tool for comparing two companies of different sizes is A) financial leverage B) short -term liquidity C) common size statements D) Annual reports 18) 19) Review of the financial statements revealed the following for Petrolis Sales Inc. Sales $1,250,000, Net income $37,500, Total assets $650,000, Long -term debt $750,000, Interest expense $65,000 and Cost of goods sold $775,000. When preparing common size financial statements interest expense would be shown as A) 5.2% B) 8.4% C) 10% D) 9.4% 19) 20) What is the common denominator for each item on the income statement when preparing a common size income statement? A) Operating profit B) Net income C) Sales D) Gross profit 20) 21) On a common size income statement, all items are shown as: A) percentages of total assets. B) percentages of gross rev
enu
