Financial Statement Analysis Final Exam |\ |\ |\ |\ |\
Review questions with answers |\ |\ |\
Providing information about the performance and financial
|\ |\ |\ |\ |\ |\ |\
position of companies |\ |\
so that users can make economic decisions best describes the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
role of: |\
A auditing.
|\
B financial reporting.
|\ |\
C financial statement analysis. - CORRECT ANSWERS ✔✔B
|\ |\ |\ |\ |\ |\ |\
A company's current financial position would best be evaluated
|\ |\ |\ |\ |\ |\ |\ |\ |\
using the: |\
A balance sheet.
|\ |\
B income statement.
|\ |\
C statement of cash flows. - CORRECT ANSWERS ✔✔A
|\ |\ |\ |\ |\ |\ |\ |\
A company's profitability for a period would best be evaluated
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
using the: |\
A balance sheet.
|\ |\
B income statement.
|\ |\
C statement of cash flows - CORRECT ANSWERS ✔✔b
|\ |\ |\ |\ |\ |\ |\ |\
,Accounting policies, methods, and estimates used in preparing
|\ |\ |\ |\ |\ |\ |\ |\
financial statements are most likely found in the:
|\ |\ |\ |\ |\ |\ |\
A auditor's report.
|\ |\
B management commentary.
|\ |\
C notes to the financial statements. - CORRECT ANSWERS ✔✔C
|\ |\ |\ |\ |\ |\ |\ |\ |\
Information about management and director compensation would
|\ |\ |\ |\ |\ |\
least likely be found in the:
|\ |\ |\ |\ |\ |\
A auditor's report.
|\ |\
B proxy statement.
|\ |\
C notes to the financial statements - CORRECT ANSWERS ✔✔A
|\ |\ |\ |\ |\ |\ |\ |\ |\
Information about a company's objectives, strategies, and
|\ |\ |\ |\ |\ |\ |\
significant risks |\
would most likely be found in the:
|\ |\ |\ |\ |\ |\
A auditor's report.
|\ |\
B management commentary.
|\ |\
C notes to the financial statements. - CORRECT ANSWERS ✔✔B
|\ |\ |\ |\ |\ |\ |\ |\ |\
What type of audit opinion is preferred when analyzing financial
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
statements?
A Qualified.
|\
B Adverse.
|\
C Unqualified. - CORRECT ANSWERS ✔✔C
|\ |\ |\ |\ |\
,Ratios are an input into which step in the financial statement
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
analysis
framework?
A Process data.
|\ |\
B Collect input data.
|\ |\ |\
C Analyze/interpret the processed data. - CORRECT ANSWERS
|\ |\ |\ |\ |\ |\ |\ |\
✔✔C
Which of the following items would most likely be classified as an
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
operating activity?
|\ |\
A Issuance of debt.
|\ |\ |\
B Acquisition of a competitor.
|\ |\ |\ |\
C Sale of automobiles by an automobile dealer. - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔C |\
Which of the following items would most likely be classified as a
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
financing
activity?
A Issuance of debt.
|\ |\ |\
B Payment of income taxes.
|\ |\ |\ |\
C Investments in the stock of a supplier. - CORRECT ANSWERS
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
✔✔A
Which of the following elements represents an economic
|\ |\ |\ |\ |\ |\ |\ |\
resource?
A Asset.
|\
, B Liability.
|\
C Owners' equity. - CORRECT ANSWERS ✔✔A
|\ |\ |\ |\ |\ |\
Which of the following elements represents a residual claim?
|\ |\ |\ |\ |\ |\ |\ |\
A Asset.
|\
B Liability.
|\
C Owners' equity. - CORRECT ANSWERS ✔✔C
|\ |\ |\ |\ |\ |\
An analyst has projected that a company will have assets of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
€2,000 at year-end and liabilities of €1,200. The analyst's
|\ |\ |\ |\ |\ |\ |\ |\ |\
projection of total owners' equity should be closest to:
|\ |\ |\ |\ |\ |\ |\ |\
A €800.
|\
B €2,000.
|\
C €3,200. - CORRECT ANSWERS ✔✔A
|\ |\ |\ |\ |\
An analyst has collected the following information regarding a
|\ |\ |\ |\ |\ |\ |\ |\ |\
company in advance of its year-end earnings announcement (in
|\ |\ |\ |\ |\ |\ |\ |\ |\
millions):
- Estimated net income: $ 200
|\ |\ |\ |\ |\
- Beginning retained earnings: $ 1,400
|\ |\ |\ |\ |\
- Estimated distributions to owners: $ 100
|\ |\ |\ |\ |\ |\
The analyst's estimate of ending retained earnings (in millions)
|\ |\ |\ |\ |\ |\ |\ |\ |\
should be closest to: |\ |\ |\
A $1,300.
|\
B $1,500.
|\
C $1,700. - CORRECT ANSWERS ✔✔B
|\ |\ |\ |\ |\
Review questions with answers |\ |\ |\
Providing information about the performance and financial
|\ |\ |\ |\ |\ |\ |\
position of companies |\ |\
so that users can make economic decisions best describes the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
role of: |\
A auditing.
|\
B financial reporting.
|\ |\
C financial statement analysis. - CORRECT ANSWERS ✔✔B
|\ |\ |\ |\ |\ |\ |\
A company's current financial position would best be evaluated
|\ |\ |\ |\ |\ |\ |\ |\ |\
using the: |\
A balance sheet.
|\ |\
B income statement.
|\ |\
C statement of cash flows. - CORRECT ANSWERS ✔✔A
|\ |\ |\ |\ |\ |\ |\ |\
A company's profitability for a period would best be evaluated
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
using the: |\
A balance sheet.
|\ |\
B income statement.
|\ |\
C statement of cash flows - CORRECT ANSWERS ✔✔b
|\ |\ |\ |\ |\ |\ |\ |\
,Accounting policies, methods, and estimates used in preparing
|\ |\ |\ |\ |\ |\ |\ |\
financial statements are most likely found in the:
|\ |\ |\ |\ |\ |\ |\
A auditor's report.
|\ |\
B management commentary.
|\ |\
C notes to the financial statements. - CORRECT ANSWERS ✔✔C
|\ |\ |\ |\ |\ |\ |\ |\ |\
Information about management and director compensation would
|\ |\ |\ |\ |\ |\
least likely be found in the:
|\ |\ |\ |\ |\ |\
A auditor's report.
|\ |\
B proxy statement.
|\ |\
C notes to the financial statements - CORRECT ANSWERS ✔✔A
|\ |\ |\ |\ |\ |\ |\ |\ |\
Information about a company's objectives, strategies, and
|\ |\ |\ |\ |\ |\ |\
significant risks |\
would most likely be found in the:
|\ |\ |\ |\ |\ |\
A auditor's report.
|\ |\
B management commentary.
|\ |\
C notes to the financial statements. - CORRECT ANSWERS ✔✔B
|\ |\ |\ |\ |\ |\ |\ |\ |\
What type of audit opinion is preferred when analyzing financial
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
statements?
A Qualified.
|\
B Adverse.
|\
C Unqualified. - CORRECT ANSWERS ✔✔C
|\ |\ |\ |\ |\
,Ratios are an input into which step in the financial statement
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
analysis
framework?
A Process data.
|\ |\
B Collect input data.
|\ |\ |\
C Analyze/interpret the processed data. - CORRECT ANSWERS
|\ |\ |\ |\ |\ |\ |\ |\
✔✔C
Which of the following items would most likely be classified as an
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
operating activity?
|\ |\
A Issuance of debt.
|\ |\ |\
B Acquisition of a competitor.
|\ |\ |\ |\
C Sale of automobiles by an automobile dealer. - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔C |\
Which of the following items would most likely be classified as a
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
financing
activity?
A Issuance of debt.
|\ |\ |\
B Payment of income taxes.
|\ |\ |\ |\
C Investments in the stock of a supplier. - CORRECT ANSWERS
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
✔✔A
Which of the following elements represents an economic
|\ |\ |\ |\ |\ |\ |\ |\
resource?
A Asset.
|\
, B Liability.
|\
C Owners' equity. - CORRECT ANSWERS ✔✔A
|\ |\ |\ |\ |\ |\
Which of the following elements represents a residual claim?
|\ |\ |\ |\ |\ |\ |\ |\
A Asset.
|\
B Liability.
|\
C Owners' equity. - CORRECT ANSWERS ✔✔C
|\ |\ |\ |\ |\ |\
An analyst has projected that a company will have assets of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
€2,000 at year-end and liabilities of €1,200. The analyst's
|\ |\ |\ |\ |\ |\ |\ |\ |\
projection of total owners' equity should be closest to:
|\ |\ |\ |\ |\ |\ |\ |\
A €800.
|\
B €2,000.
|\
C €3,200. - CORRECT ANSWERS ✔✔A
|\ |\ |\ |\ |\
An analyst has collected the following information regarding a
|\ |\ |\ |\ |\ |\ |\ |\ |\
company in advance of its year-end earnings announcement (in
|\ |\ |\ |\ |\ |\ |\ |\ |\
millions):
- Estimated net income: $ 200
|\ |\ |\ |\ |\
- Beginning retained earnings: $ 1,400
|\ |\ |\ |\ |\
- Estimated distributions to owners: $ 100
|\ |\ |\ |\ |\ |\
The analyst's estimate of ending retained earnings (in millions)
|\ |\ |\ |\ |\ |\ |\ |\ |\
should be closest to: |\ |\ |\
A $1,300.
|\
B $1,500.
|\
C $1,700. - CORRECT ANSWERS ✔✔B
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