Financial Statement Analysis Part 5

Quiz Questions

• 1.
  Q.1 Which of the following ratios is used to assess a company's internal liquidity?

  • A.
    A. Total asset turnover.
  • B.
    B. Interest coverage.
  • C.
    C. Current ratio.
• 2.
  Q2.Earnings before interest and taxes (EBIT) is also known as:

  • A.
    A) earnings before income taxes.
  • B.
    B) gross profit.
  • C.
    C) operating profit.
• 3.
  Q3.Which of the following classifications of ratios is incorrect to be used to evaluate a firm’s operating efficiency?

  • A.
    A. Profitability ratios
  • B.
    B. Solvency ratios
  • C.
    C. Activity ratios
• 4.
  Q4.Which of the following are the correct option current assets that result from the accrual process

  • A.
    A) Cash equivalents.
  • B.
    B) accounts receivable.
  • C.
    C) Marketable securities.
• 5.
  Q5.The term "liquidity" refers to a company's ability to pay its debts.

  • A.
    A. Meet its long-term debt obligations.
  • B.
    B. Meet its short-term obligations.
  • C.
    C. Issue bonds in the capital market.
• 6.
  Q6.Selling short-term assets and renegotiating debt agreements are the best ways to describe a company's liquidity strategy.

  • A.
    A) primary sources of liquidity.
  • B.
    B) pulls and drags on liquidity.
  • C.
    C) secondary sources of liquidity.
• 7.
  Q7. A decrease in the valuation allowance results in an

  • A.
    A. Increase in total assets.
  • B.
    B. Decrease in shareholders’ equity.
  • C.
    C. Increase in income tax expense.
• 8.
  Q8. When a profit and loss statement explicitly shows gross profit as a subtotal, it does so by referencing a

  • A.
    A. Multi-step format.
  • B.
    B. Common-size format.
  • C.
    C. Single-step format.
• 9.
  Q9.Which of the following will correct option to a decrease in the number of days of payables?

  • A.
    A. Increasing cost of goods sold
  • B.
    B. Increasing accounts payables
  • C.
    C. Decreasing payables turnover
• 10.
  Q10. A change in accounts payable will necessitate which of the following when using the indirect method to calculate cash flow from operating activities?

  • A.
    A) When accounts payable increase, there is a negative (positive) adjustment to net income (decreases).
  • B.
    B) Regardless of whether accounts payable increase or decrease, a negative adjustment to net income will be applied.
  • C.
    C) When accounts payable increase, a positive (or negative) adjustment to net income is made (decreases).
• 11.
  Q11. Which method of expense recognition is the most appropriate for intangible assets with an indefinite useful lives, and why?

  • A.
    A) Test for impairment but do not amortize.
  • B.
    B)Use accelerated amortization for tax reporting and straight-line amortization for financial reporting.
  • C.
    C) Use straight-line amortization.
• 12.
  Q12.For a company with a straightforward capital structure, all of the following are required in order to calculate basic earnings per share (EPS), with the exception of

  • A.
    A) dividends paid to preferred shareholders.
  • B.
    B) the timing and number of shares issued or repurchased during the year.
  • C.
    C) dividends paid to common shareholders.
• 13.
  Q13. Which of the following types of assets is will be amortized

  • A.
    A. Goodwill
  • B.
    B. Tangible assets with finite useful lives
  • C.
    C. Intangible assets with finite lives
• 14.
  Q14.Taxable temporary differences would arise when

  • A.
    A. The carrying amount of a liability is greater than the liability's tax base.
  • B.
    B. The carrying value of an asset is greater than its tax base.
  • C.
    C. The carrying value of an asset is less than the tax base of the asset..
• 15.
  Q15. An asset and liability classification system is used to group various classes of assets and liabilities together in a balance sheet.

  • A.
    A. Pro-forma balance sheet.
  • B.
    B. Classified balance sheet.
  • C.
    C. Common-size balance sheet.

Quiz Outcomes

• 1.
  Result 1

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