FINANCIAL STATEMENT ANALYSIS
FINAL EXAM REVIEW 100%
ACCURATE
,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. - ANSWERSB
A company's current financial position would best be evaluated using the:
A balance sheet.
B income statement.
C statement of cash flows. - ANSWERSA
A company's profitability for a period would best be evaluated using the:
A balance sheet.
B income statement.
C statement of cash flows - ANSWERSb
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. - ANSWERSC
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 - ANSWERSA
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. - ANSWERSB
What type of audit opinion is preferred when analyzing financial statements?
A Qualified.
B Adverse.
C Unqualified. - ANSWERSC
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. - ANSWERSC
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. - ANSWERSC
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. - ANSWERSA
Which of the following elements represents an economic resource?
A Asset.
B Liability.
C Owners' equity. - ANSWERSA
Which of the following elements represents a residual claim?
A Asset.
B Liability.
C Owners' equity. - ANSWERSC
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. - ANSWERSA
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. - ANSWERSB
An analyst has compiled the following information regarding Rubsam, Inc:
- Liabilities at year-end: € 1,000
- Contributed capital at year-end: € 500
- Beginning retained earnings: € 600
- Revenue during the year: € 5,000
- Expenses during the year: € 4,300
, There have been no distributions to owners. The analyst's most likely estimate of total
assets at year-end should be closest to:
A €2,100.
B €2,300.
C €2,800. - ANSWERSC
A group of individuals formed a new company with an investment of $500,000. The
most likely effect of this transaction on the company's accounting equation at the time of
the formation is an increase in cash and:
A an increase in revenue.
B an increase in liabilities.
C an increase in contributed capital. - ANSWERSC
HVG, LLC paid $12,000 of cash to a real estate company upon signing a lease on 31
December 2005. The payment represents a $4,000 security deposit and $4,000 of rent
for each of January 2006 and February 2006. Assuming that the
correct accounting is to reflect both January and February rent as prepaid, the most
likely effect on HVG's accounting equation in December 2005 is:
A no net change in assets.
B a decrease in assets of $8,000.
C a decrease in assets of $12,000. - ANSWERSA
TRR Enterprises sold products to customers on 30 June 2006 for a total price of
€10,000. The terms of the sale are that payment is due in 30 days. The cost of the
products was €8,000. The most likely net change in TRR's total assets on 30 June 2006
related to this transaction is:
A €0.
B €2,000.
C €10,000. - ANSWERSB
On 30 April 2006, Pinto Products received a cash payment of $30,000 as a deposit on
production of a custom machine to be delivered in August 2006. This transaction would
most likely result in which of the following on 30 April 2006?
A No effect on liabilities.
B A decrease in assets of $30,000.
C An increase in liabilities of $30,000. - ANSWERSC
Squires & Johnson, Ltd., recorded €250,000 of depreciation expense in December
2005. The most likely effect on the company's accounting equation is:
A no effect on assets.
B a decrease in assets of €250,000.
C an increase in liabilities of €250,000. - ANSWERSB
An analyst who is interested in assessing a company's financial position is most likely to
focus on which financial statement?
A Balance sheet
FINAL EXAM REVIEW 100%
ACCURATE
,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. - ANSWERSB
A company's current financial position would best be evaluated using the:
A balance sheet.
B income statement.
C statement of cash flows. - ANSWERSA
A company's profitability for a period would best be evaluated using the:
A balance sheet.
B income statement.
C statement of cash flows - ANSWERSb
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. - ANSWERSC
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 - ANSWERSA
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. - ANSWERSB
What type of audit opinion is preferred when analyzing financial statements?
A Qualified.
B Adverse.
C Unqualified. - ANSWERSC
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. - ANSWERSC
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. - ANSWERSC
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. - ANSWERSA
Which of the following elements represents an economic resource?
A Asset.
B Liability.
C Owners' equity. - ANSWERSA
Which of the following elements represents a residual claim?
A Asset.
B Liability.
C Owners' equity. - ANSWERSC
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. - ANSWERSA
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. - ANSWERSB
An analyst has compiled the following information regarding Rubsam, Inc:
- Liabilities at year-end: € 1,000
- Contributed capital at year-end: € 500
- Beginning retained earnings: € 600
- Revenue during the year: € 5,000
- Expenses during the year: € 4,300
, There have been no distributions to owners. The analyst's most likely estimate of total
assets at year-end should be closest to:
A €2,100.
B €2,300.
C €2,800. - ANSWERSC
A group of individuals formed a new company with an investment of $500,000. The
most likely effect of this transaction on the company's accounting equation at the time of
the formation is an increase in cash and:
A an increase in revenue.
B an increase in liabilities.
C an increase in contributed capital. - ANSWERSC
HVG, LLC paid $12,000 of cash to a real estate company upon signing a lease on 31
December 2005. The payment represents a $4,000 security deposit and $4,000 of rent
for each of January 2006 and February 2006. Assuming that the
correct accounting is to reflect both January and February rent as prepaid, the most
likely effect on HVG's accounting equation in December 2005 is:
A no net change in assets.
B a decrease in assets of $8,000.
C a decrease in assets of $12,000. - ANSWERSA
TRR Enterprises sold products to customers on 30 June 2006 for a total price of
€10,000. The terms of the sale are that payment is due in 30 days. The cost of the
products was €8,000. The most likely net change in TRR's total assets on 30 June 2006
related to this transaction is:
A €0.
B €2,000.
C €10,000. - ANSWERSB
On 30 April 2006, Pinto Products received a cash payment of $30,000 as a deposit on
production of a custom machine to be delivered in August 2006. This transaction would
most likely result in which of the following on 30 April 2006?
A No effect on liabilities.
B A decrease in assets of $30,000.
C An increase in liabilities of $30,000. - ANSWERSC
Squires & Johnson, Ltd., recorded €250,000 of depreciation expense in December
2005. The most likely effect on the company's accounting equation is:
A no effect on assets.
B a decrease in assets of €250,000.
C an increase in liabilities of €250,000. - ANSWERSB
An analyst who is interested in assessing a company's financial position is most likely to
focus on which financial statement?
A Balance sheet
