Final Exam - Financial Statement Analysis
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questions with answers |\ |\
There are three elements of risk that help in understanding
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differences across firms and changes over time in ROAs. Which of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the following is not one of these three elements? - CORRECT
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ANSWERS ✔✔Financial Leverage |\ |\
Smith Company purchases shares of Thompson Company for
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$60,000 on October 31, 2016. The company classifies the stocks
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as "trading securities." On December 31, 2016, the fair value of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
these shares is $70,000. What is the impact of the revaluation of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the shares at fair value (December 31, 2016) on the Income
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Statement and Balance Sheet? - CORRECT ANSWERS ✔✔Assets|\ |\ |\ |\ |\ |\ |\ |\
increase by $10,000; Net Income increases by $10,000.
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Sinclair Inc. reports the following information for 2016:
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Total Revenue: $650,000Total Expenses (incl. Interest Expense):
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$320,000Total Shareholders' Equity: $2,250,000Total Liabilities: |\ |\ |\ |\ |\
$450,000
The Interest Expense is $50,000 and the Income Tax Rate is 40%.
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What is the company's Return on Assets (ROA)? - CORRECT
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ANSWERS ✔✔13.33% |\
Mitchel Corporation is a manufacturing company. The purchase of
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an office building would be considered - CORRECT ANSWERS
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✔✔an investing activity. |\ |\
, Tillman's Company recorded a Net Income of $50,000 in 2016.
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Accounts Receivable increased by $12,000; accounts payable
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increased by $7,000; merchandise inventory decreased by
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$2,000; gain on the sale of an office building was $4,000; and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
depreciation expense was $3,000. What are the company's cash
|\ |\ |\ |\ |\ |\ |\ |\ |\
flows from operations in 2016? - CORRECT ANSWERS ✔✔$46,000
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Nichols Corporation spent $100,000 in cash for merchandise
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inventory purchases in 2016. The balance on the accounts
|\ |\ |\ |\ |\ |\ |\ |\ |\
payable account did not change in 2016; however, the
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merchandise inventory increased from $35,000 (beginning |\ |\ |\ |\ |\ |\
inventory) to $45,000 (ending inventory). What was Nichols
|\ |\ |\ |\ |\ |\ |\ |\
Corporation's COGS? - CORRECT ANSWERS ✔✔$90,000 |\ |\ |\ |\ |\
Which of the following is not one of the six interrelated
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
sequential steps in financial statement analysis? - CORRECT
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ANSWERS ✔✔Evaluate other analysts' valuation reports
|\ |\ |\ |\ |\
One important difference between return on assets (ROA) and
|\ |\ |\ |\ |\ |\ |\ |\ |\
return on common shareholders' equity (ROCE) is - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔ROA does not differentiate based on how a
|\ |\ |\ |\ |\ |\ |\ |\ |\
company finances its assets; ROCE does.
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Initial Present Value: Carlos Computers sells a computer for
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$5,000 on January 1, 2016, and allows the customer to delay the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
entire payment for 4 years. The company assigns an annual
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
interest/discount rate of 5% based on the customer's credit |\ |\ |\ |\ |\ |\ |\ |\ |\
score. What total amount of revenue (sales revenue + interest
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
revenue) can the company recognize for year 1 and year 2
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
|\ |\ |\ |\ |\ |\
questions with answers |\ |\
There are three elements of risk that help in understanding
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
differences across firms and changes over time in ROAs. Which of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the following is not one of these three elements? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔Financial Leverage |\ |\
Smith Company purchases shares of Thompson Company for
|\ |\ |\ |\ |\ |\ |\ |\
$60,000 on October 31, 2016. The company classifies the stocks
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
as "trading securities." On December 31, 2016, the fair value of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
these shares is $70,000. What is the impact of the revaluation of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the shares at fair value (December 31, 2016) on the Income
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
Statement and Balance Sheet? - CORRECT ANSWERS ✔✔Assets|\ |\ |\ |\ |\ |\ |\ |\
increase by $10,000; Net Income increases by $10,000.
|\ |\ |\ |\ |\ |\ |\
Sinclair Inc. reports the following information for 2016:
|\ |\ |\ |\ |\ |\ |\
Total Revenue: $650,000Total Expenses (incl. Interest Expense):
|\ |\ |\ |\ |\ |\ |\
$320,000Total Shareholders' Equity: $2,250,000Total Liabilities: |\ |\ |\ |\ |\
$450,000
The Interest Expense is $50,000 and the Income Tax Rate is 40%.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
What is the company's Return on Assets (ROA)? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔13.33% |\
Mitchel Corporation is a manufacturing company. The purchase of
|\ |\ |\ |\ |\ |\ |\ |\
an office building would be considered - CORRECT ANSWERS
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
✔✔an investing activity. |\ |\
, Tillman's Company recorded a Net Income of $50,000 in 2016.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
Accounts Receivable increased by $12,000; accounts payable
|\ |\ |\ |\ |\ |\ |\
increased by $7,000; merchandise inventory decreased by
|\ |\ |\ |\ |\ |\ |\
$2,000; gain on the sale of an office building was $4,000; and
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
depreciation expense was $3,000. What are the company's cash
|\ |\ |\ |\ |\ |\ |\ |\ |\
flows from operations in 2016? - CORRECT ANSWERS ✔✔$46,000
|\ |\ |\ |\ |\ |\ |\ |\
Nichols Corporation spent $100,000 in cash for merchandise
|\ |\ |\ |\ |\ |\ |\ |\
inventory purchases in 2016. The balance on the accounts
|\ |\ |\ |\ |\ |\ |\ |\ |\
payable account did not change in 2016; however, the
|\ |\ |\ |\ |\ |\ |\ |\ |\
merchandise inventory increased from $35,000 (beginning |\ |\ |\ |\ |\ |\
inventory) to $45,000 (ending inventory). What was Nichols
|\ |\ |\ |\ |\ |\ |\ |\
Corporation's COGS? - CORRECT ANSWERS ✔✔$90,000 |\ |\ |\ |\ |\
Which of the following is not one of the six interrelated
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
sequential steps in financial statement analysis? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔Evaluate other analysts' valuation reports
|\ |\ |\ |\ |\
One important difference between return on assets (ROA) and
|\ |\ |\ |\ |\ |\ |\ |\ |\
return on common shareholders' equity (ROCE) is - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔ROA does not differentiate based on how a
|\ |\ |\ |\ |\ |\ |\ |\ |\
company finances its assets; ROCE does.
|\ |\ |\ |\ |\
Initial Present Value: Carlos Computers sells a computer for
|\ |\ |\ |\ |\ |\ |\ |\ |\
$5,000 on January 1, 2016, and allows the customer to delay the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
entire payment for 4 years. The company assigns an annual
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
interest/discount rate of 5% based on the customer's credit |\ |\ |\ |\ |\ |\ |\ |\ |\
score. What total amount of revenue (sales revenue + interest
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
revenue) can the company recognize for year 1 and year 2
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
