Financial Statement Analysis Chapter 1
Chapter 1: Overview of Financial Statement Analysis
Sample Multiple Choice Questions
1. Which of the following is likely to be the most informative source if you were interested in a company's business plan or strategy? A) auditor's letter B) management discussion and analysis C) proxy statement D) Footnotes
Answer: B
2. Which of the following would not be considered a source of financing? A) notes receivable B) common stockholders' equity C) retained earnings D) capital lease obligations
Answer: A
3. Wilco Company reports the following: 2005 2004
Retained Earnings $2,000,000 $ 1,300,000
Common Stock $ 500,000 $ 500,000
Paid-in Capital $3,000,000 $ 3,000,000
Net Income for year $ 900,000 $ 400,000
Dividend payout ratio for 2005 was: A) 27% B) 12% C) 22.2% D) Not determinable
Answer: C
4. If a company receives an unqualified audit opinion it means the auditors: A) did not complete a full audit and therefore do not feel qualified to give and opinion on financial statements B) are providing assurance that the company will remain financially viable for at least the next year C) are providing assurance that the company's financial statements fairly present company's financial performance and position D) are providing assurance that the company's financial statements are free from misstatement, fraudulent accounting and fairly indicate future performance
Answer: C
5. The Management Discussion and Analysis Section of the annual report: A) is required by the SEC B) is optional but normally included in the annual report C) is required by the SEC only if the company has suffered from unfavorable trends or there are significant uncertainty concerning liquidity of the company D) is required by the SEC only if they have a qualified audit opinion
Answer: A
Use the following to answer questions 6-7:
You are analyzing a large stable
Sample Multiple Choice Questions
1. Which of the following is likely to be the most informative source if you were interested in a company's business plan or strategy? A) auditor's letter B) management discussion and analysis C) proxy statement D) Footnotes
Answer: B
2. Which of the following would not be considered a source of financing? A) notes receivable B) common stockholders' equity C) retained earnings D) capital lease obligations
Answer: A
3. Wilco Company reports the following: 2005 2004
Retained Earnings $2,000,000 $ 1,300,000
Common Stock $ 500,000 $ 500,000
Paid-in Capital $3,000,000 $ 3,000,000
Net Income for year $ 900,000 $ 400,000
Dividend payout ratio for 2005 was: A) 27% B) 12% C) 22.2% D) Not determinable
Answer: C
4. If a company receives an unqualified audit opinion it means the auditors: A) did not complete a full audit and therefore do not feel qualified to give and opinion on financial statements B) are providing assurance that the company will remain financially viable for at least the next year C) are providing assurance that the company's financial statements fairly present company's financial performance and position D) are providing assurance that the company's financial statements are free from misstatement, fraudulent accounting and fairly indicate future performance
Answer: C
5. The Management Discussion and Analysis Section of the annual report: A) is required by the SEC B) is optional but normally included in the annual report C) is required by the SEC only if the company has suffered from unfavorable trends or there are significant uncertainty concerning liquidity of the company D) is required by the SEC only if they have a qualified audit opinion
Answer: A
Use the following to answer questions 6-7:
You are analyzing a large stable