ACCT 6344 FINANCIAL STATEMENT ANALYSIS
ACCT 6344 Financial Statement Analysis,
Multiple Choice
Multiple Choice
Question The objective of forecasting is to develop
Answer stand-alone financial statements for future analysis.
Answer stand-alone financial statements for future analysis.
a set of realistic expectations for future value-relevant payoffs.
a balance sheet and income statement that articulate.
financial statements for comparison to industry averages.
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Multiple Choice
Question Nichols and Wahlen's 2004 study showed that superior forecasting provides the potential to earn superior security returns. Nichols and Wahlen's findings indicate
Answer that an investor could earn excess returns if the investor could predict accurately the sign of the change in earnings one year ahead.
that an investor could earn excess returns if the investor could predict accurately the magnitude of the change in earnings one year ahead.
that an investor could earn excess returns if the investor could predict accurately the sign of the change in cash flows from operations one year ahead.
that an investor could earn excess returns if the investor could predict accurately the sign of the change in working capital one year ahead.
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Multiple Choice
Question Financial statement forecasts rely on additivity within financial statements and articulation across financial statements. Given this information forecasts of future growth in inventory will most likely affect growth in
Answer accounts receivables. accounts payable.
depreciation.
salary payable.
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Multiple Choice
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Question Financial statement forecasts rely on additivity within financial statements and articulation across financial statements. Given this information sales growth forecasts will most likely affect growth in
Answer accounts receivables.
Answer accounts receivables.
accounts payable.
depreciation.
salary payable.
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Multiple Choice
Question Projecting sales price changes depends on factors specific to the firm and its industry that might affect demand and price elasticity. Which of the following types of companies would most likely be able to increase prices?
Answer A firm in a capital intensive industry that is expected to operate near capacity for
the near future.
Answer A firm in a capital intensive industry that is expected to operate near capacity for
the near future.
A firm in a capital intensive industry in which excess capacity exists.
A firm operating in an industry that is expected to experience technological
improvements in its production process.
A firm operating in an industry that is transitioning from the high growth to the
maturity phase of its life cycle.
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Multiple Choice
Question Projecting sales price changes depends on factors specific to the firm and its industry that might affect demand and price elasticity. Which of the following companies would most likely not be able to increase prices in the near future?
Answer A firm in a capital intensive industry that is expected to operate near capacity for
Answer A firm in a capital intensive industry that is expected to operate near capacity for
the near future.
A firm in a capital intensive industry in which excess capacity exists.
A firm operating in an industry that is expected to maintain its current production
processes.
A firm operating in an industry that is transitioning from the introduction phase to
the high growth phase of its life cycle.
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Multiple Choice
Question If a company has very low operating leverage (i.e. a low proportion of fixed costs in the cost structure) and no changes are expected in operations
Answer percentage change income statement percentages can serve as the basis for
Answer percentage change income statement percentages can serve as the basis for
projecting operating expenses.
using common-size income statement percentages will overstate future projected
operating expenses.
using common-size income statement percentages will understate future projected
operating expenses.
using common-size income statement percentages can serve as a reasonable
basis for projecting future operating expenses.
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Multiple Choice
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Question When projecting operating expenses it is important to determine the mix of fixed and variable costs, one clue suggesting the presence of fixed costs is
Answer the percentage change in cost of goods sold in prior years is significantly greater
Answer the percentage change in cost of goods sold in prior years is significantly greater
than the percentage change in sales.
the percentage change in cost of goods sold in prior years is significantly less
than the percentage change in sales.
low capital intensity in the production process.
the percentage change in sales in prior years is significantly greater than the
percentage change in receivables.
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Multiple Choice
Question To ensure that the financial statements articulate, it is important that the change in the cash balance on the balance sheet each year agrees with
Answer the cash collections from sales in the projected income statement.
Answer the cash collections from sales in the projected income statement.
the cash provided by or used by operations on the projected statement of cash flows.
the net change in cash on the projected statement of cash flows.
the net change in working capital from period to period.
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Multiple Choice
Question An analyst using the inventory turnover ratio to calculate future levels of inventory may face the problem that
Answer the method reduces the potential understatement inherent in average balances. the method can introduce artificial volatility in ending balances.
the method results in understating inventory each year.
the method results in overstating inventory each year.
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Multiple Choice
Question Sparky’s
Sparky’s sells auto parts. Provided below is selected financial information from the company’s 2012 annual report:
Sparky’s Selected Financial Statement data
Fiscal year end 2012 2011
(amounts in thousands of dollars)
Net sales $125,410 $106,380
Cost of Goods Sold -104,090 -89,359
Gross Profit $21,320 $17,021
Inventory $31,353 $30,850
Fiscal year end 2012 2011
(amounts in thousands of dollars)
Net sales $125,410 $106,380
Cost of Goods Sold -104,090 -89,359
Gross Profit $21,320 $17,021
Inventory $31,353 $30,850
Using Sparky’s financial information what is the company’s inventory turnover ratio for 2012?
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Answer
Correct
Feedback
Incorrect
Feedback
0.69
1.00 3.35 4.03
Sparky’s Selected Financial
Statement data
For Fiscal year end 2012 2011
(amounts in thousands of
dollars)
Net sales $125,410 $106,380
Cost of Goods Sold -104,090 -89,359
Gross profit $21,320 $17,021
Inventory $31,353 $30,850
Inventory Turnover 3.35
$104,090/.5($31,353+$30,850)
Sparky’s Selected Financial
Statement data
For Fiscal year end 2012 2011
(amounts in thousands of
dollars)
Net sales $125,410 $106,380
Cost of Goods Sold -104,090 -89,359
Gross profit $21,320 $17,021
Inventory $31,353 $30,850
Inventory Turnover 3.35
$104,090/.5($31,353+$30,850)
Statement data
For Fiscal year end 2012 2011
(amounts in thousands of
dollars)
Net sales $125,410 $106,380
Cost of Goods Sold -104,090 -89,359
Gross profit $21,320 $17,021
Inventory $31,353 $30,850
Inventory Turnover 3.35
$104,090/.5($31,353+$30,850)
Sparky’s Selected Financial
Statement data
For Fiscal year end 2012 2011
(amounts in thousands of
dollars)
Net sales $125,410 $106,380
Cost of Goods Sold -104,090 -89,359
Gross profit $21,320 $17,021
Inventory $31,353 $30,850
Inventory Turnover 3.35
$104,090/.5($31,353+$30,850)
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Multiple Choice
Question Sparky’s
Sparky’s sells auto parts. Provided below is selected financial information from the company’s 2012 annual report:
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ALL 63 Question 100% Result A+ Graded
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