Financial Statement Analysis Question
answers already passed 2025
What is the purpose of financial statement analysis? - correct answer 1) To
examine data for obvious trends and patterns.
2) To illuminate company financial, physical, operational, and organizational
strengths and weaknesses
3) To identify the next questions to ask of various operating groups
Who are Analyzers or Users of Financial Analyses
Internal users (company managers) - correct answer 1) Lenders
2) Stockholders
3) Competitors
Can finance can be used effectively in competitive rivalry? - correct answer
Yes.
Facts about peer firms and industries: - correct answer Some industries are
very diverse
Many firms operate in multiple industries
Some firms really don't have peers (conglomerates)
Even some comparisons that appear to "make sense" can be problematic
Basic Financial Analysis Tools - correct answer Common size financial
statements
Financial ratios
, Common Size Financial Statements - correct answer - Statement values are
transformed into percentages
- Percentages make it easier to make comparisons and spot trends
Two types of common size statements - correct answer Horizontal
Vertical
Vertical Common Size Analysis - correct answer Each line items is divided by
a common value
- Income Statement: divided by Net Sales
- Balance sheet: divided by Total Assets
Horizontal Common Size Analysis - correct answer The percent change in
each Income Statement and Balance Sheet is calculated from period to period
- 2015 income/ 2014 income =
There is no universal agreement between companies over how specific ratios
are calculated; the key is consistency within the company from year to year. -
correct answer True.
Financial ratios are just numbers and have to be compared to some
benchmark - correct answer True.
Liquidity ratios measure what? - correct answer A measure of the company's
ability to meet short term obligations
List the 4 Liquidity ratios: - correct answer Current
Quick
answers already passed 2025
What is the purpose of financial statement analysis? - correct answer 1) To
examine data for obvious trends and patterns.
2) To illuminate company financial, physical, operational, and organizational
strengths and weaknesses
3) To identify the next questions to ask of various operating groups
Who are Analyzers or Users of Financial Analyses
Internal users (company managers) - correct answer 1) Lenders
2) Stockholders
3) Competitors
Can finance can be used effectively in competitive rivalry? - correct answer
Yes.
Facts about peer firms and industries: - correct answer Some industries are
very diverse
Many firms operate in multiple industries
Some firms really don't have peers (conglomerates)
Even some comparisons that appear to "make sense" can be problematic
Basic Financial Analysis Tools - correct answer Common size financial
statements
Financial ratios
, Common Size Financial Statements - correct answer - Statement values are
transformed into percentages
- Percentages make it easier to make comparisons and spot trends
Two types of common size statements - correct answer Horizontal
Vertical
Vertical Common Size Analysis - correct answer Each line items is divided by
a common value
- Income Statement: divided by Net Sales
- Balance sheet: divided by Total Assets
Horizontal Common Size Analysis - correct answer The percent change in
each Income Statement and Balance Sheet is calculated from period to period
- 2015 income/ 2014 income =
There is no universal agreement between companies over how specific ratios
are calculated; the key is consistency within the company from year to year. -
correct answer True.
Financial ratios are just numbers and have to be compared to some
benchmark - correct answer True.
Liquidity ratios measure what? - correct answer A measure of the company's
ability to meet short term obligations
List the 4 Liquidity ratios: - correct answer Current
Quick
